Budget 2016–17 has made three important Provisions relating to central transfers to states.
Rationalization of Centrally Sponsored Schemes (CSS)
 Background
 Government of India through NITI Aayog constituted a subgroup of chief ministers for rationalizing and restructuring the CSS.
 It recommended that focus of the CSS should be on the schemes that comprise the National Development Agenda.
 It further recommended that the schemes be divided into “Core” and “Optional” schemes and amongst the Core Schemes those for social protection and inclusion should be called “Core of the Core”.
 The subgroup further recommended that the investment levels in the Core Schemes should be maintained so as to ensure that the optimum size of the programme does not shrink.
 New Framework for Grants in Budget 2016-17
 The government on the recommendation of the subgroup of chief ministers restructured the grants.
 As per the decision of Government, the existing funding pattern of schemes defined as 'core of the core' have been retained.
 The funding pattern of 'core' schemes, which also form part of the National Development agenda, will be shared 60:40 between the Centre and the States (90:10 for the 8 North Eastern States and 3 Himalayan states).
 In case a scheme/sub-scheme in the above classification that has a Central Funding pattern of less than 60:40, the existing funding pattern will continue.
 The other optional schemes will be optional for the State Governments and their fund sharing pattern will be 50:50 between the Centre and the States (80:20 for the 8 North Eastern States and 3 Himalyan States). Examples of such schemes are Border Area Development Programme, National River Conservation Plan, Shyama Prasad Mukherjee RURBAN Mission etc.
 In Union Budget 2016–17 the total number of CSS has been brought down to 28.

Core of the Core (6 Schemes)
 Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA)
 National Social Assistance Programme
 Umbrella Scheme for the Development of Scheduled Castes
 Umbrella Programme for Development of Scheduled Tribes (Tribal Education and Van Bandhu Kalyan Yojana)
 Umbrella Programme for Development of Backward Classes and other vulnerable groups
 Umbrella Programme for Development of Minorities (a) Multi Sectoral Development Programme for Minorities. (b) Education Scheme for Madaras and Minorities

Core (18 Schemes)
For example
 Green Revolution (a) Krishi Unnati Yojana (b) Rashtriya Krishi Vikas Yojana
 White Revolution - Rashtriya Pashudhan Vikas Yojna (Livestock Mission, Veternary Services and Dairy Development)
 Pradhan Mantri Krishi Sinchai Yojana
 Swachh Bharat Abhiyan
 National Health Mission (NHM)
 Integrated Child Development Services (Umbrella ICDS)
 Member of Parliament Local Area Development Scheme. etc

Devolution of taxes post the Fourteenth Finance Commission (FFC) award
 Tax devolution has witnessed a major jump in the total resource transfers to states due to the increase in tax devolution to 42% of the divisible pool.
 Aggregate transfer to states2 in 2016–17 is ₹9, 18,093 crore as compared to ₹8, 18,034 crore in 2015–16.

Effective outcome-based monitoring of implementation of schemes and doing away with the plan and non-plan expenditure distinction in the budget after the completion of the Twelfth Five Year Plan
 An exercise to rationalize Plan and Non Plan schemes of all Ministries and Departments had been undertaken.
 The existing programmes and schemes have been re-organized into outcome based Umbrella programmes and schemes to avoid thin spread of resources.