It tries to give intellectual justification to deliver resources to potential ally

Trashing the report of the Dr. Raghuram Rajan Committee for Evolving a Composite Development Index of States on many counts, Chief Minister Jayalalithaa has charged Union Finance Minister P. Chidambaram and his Ministry with attempting to, by setting up the panel, prejudice and undermine the work of the 14th Finance Commission.

Ms.Jayalalithaa, who wrote to Prime Minister Manmohan Singh on Tuesday urging him to reject the report, said it was apparent that the report was an attempt to provide an “intellectual justification” to deliver resources to a potential political ally. Also it was to meet the political objective of the mentor of the report.

“Special Category Status”

The background to the Committee was the repeated demand of Bihar for “Special Category Status” as that would enable greater fund flow to the State and address its developmental deficit, said the letter, details of which were released to the media on Wednesday.

A committee set up by the Finance Minister could never substitute the constitutionally-mandated process of the Finance Commission.

With the 14th Finance Commission already formed, “it should be allowed to function freely. There should be no “such attempts at deliberate tutoring and misleading inputs from the Government of India masquerading as intellectual attempts at redressing backwardness,” she added.

The Rajan Committee report failed to take note of some very crucial dimensions of Centre-State financial relations in India. Its assumption that the purpose of transfer of resources was primarily to reduce regional disparities was incorrect. “The report fails to capture the multiple dimensions of different types of transfer from the Centre to the States,” she said, cautioning that any attempt to apply the findings on a wide scale would be very simplistic and unfair.

Condemning the report for “completely ignoring the historical background while advocating the new mechanism of allocation based on the underdevelopment index,” Ms.Jayalalithaa said any such far reaching modification would have to be approved by the Union Planning Commission and the National Development Council.

The report “contains within it the danger of a substantial pre-emption of grant resources in favour of a few populous States if applied more generally to Central transfers.” Given that barely six months remain for the UPA government’s term, “I do not think this is the appropriate time to undertake such a sensitive and complex exercise.”

While ranking of Tamil Nadu as the third relatively-developed State was “a matter of gratification and recognition” of sustained developmental efforts, there were a number of issues with the index.

Describing the allocation formula as skewed and a highly unfair mechanism, Ms.Jayalalithaa said “using mathematical jugglery to disproportionately increase resource allocation to a selected group of States is invidious and an attempt to rob Peter to pay Paul.”

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