‘Fiscal federalism, better delivery mechanism will then be ensured'

Experts in economics have called for a national consensus over major policy decisions to ensure success of fiscal federalism and better delivery mechanism.

Speaking at the inaugural of the two-day national seminar on ‘60 years of fiscal federalism in India' on Saturday, Vice-Chairman of Rajiv Yuva Kiranulu K.C. Reddy and professor in National Institute of Public Finance and Policy Tapas K. Sen said, with the single party rule becoming a thing of the past, consensus was elusive over several issues. However, they felt that with the 73{+r}{+d}and the 74{+t}{+h}Amendments, local self-governance had gained momentum.

The seminar is being organised by the Department of Economics, Andhra University, with the sponsorship of the University Grants Commission and the Indian Council of Social Science Research. Prof. Reddy said in development economics, fiscal imbalances were linked to resources. He said the principles of federalism had eroded over the years and none of the States was happy with the recommendations of the 13{+t}{+h}Finance Commission. In transfer of funds, the Planning Commission had become more powerful than the Finance Commission, though it was not a constitutional body.


Prof. Sen observed that the States had to blame themselves as most of them did not take their developmental obligations seriously enough as their share of contractual expenditures in the total expenditure over the years. “Self-perpetuation of the government (political leaders and the government machinery) is the paramount goal. Augmenting and expanding supply of essential public services have became incidental only,” he stated.

This allowed the Centre to occupy the vacuum and expand its effective domain through various Centrally-sponsored schemes and increasingly dominant public enterprises such as the NTPC and the National Hydro Power Corporation.

“Many of these are entirely unnecessary. The entire Ministry of Agriculture is really redundant, the small elements of it that are not, can easily be merged with other Ministries. Similarly, the Ministries of Health and Education could be pruned considerably if the States honour their responsibilities in these areas.”

He felt there would be no need for the NTPC and the NHPC if the States handled their energy sectors better and did not load their electricity boards with huge losses consequent on short-sighted, politically expedient policies, particularly with respect to subsidies (user charges).

Seminar director R. Sudarsana Rao said fiscal imbalances were continuing vertically and horizontally, as the volume of receipts had increased manifold over the years.

AU Rector P.V.G.D. Prasad Reddy, Principal of AU College of Arts and Commerce K. Sreeram Murthy, and Economics Department Head S.K.V.S. Raju spoke.

  • Principles of federalism have eroded over the years: K.C. Reddy

  • States not taking developmental obligations seriously: Tapas K. Sen