The post-2014 period has posed a new crisis to federalism in India, particularly to its fiscal federalism, said R. Ramkumar, Professor at School of Development Studies, Tata Institute of Social Sciences (TISS).
He was speaking at programme organised on the 7th death anniversary of activist-journalist Gauri Lankesh, organised by Gauri Memorial Trust.
The Narendra Modi-led government had disbanded the Planning Commission to replace it with Niti Aayog and transferred powers to the Finance Ministry, essentially allocating tax share to states a political decision, he said. “Planning commission had its problems. However, it decided on the allocation of tax share of states based on a formula. States could go to the planning commission and make a representation. All that was shut down,” Prof. Ramkumar said.
State and central shares
Prof. Ramkumar also pointed out how the previous 90:10 ratio of Centre and States in terms of contribution to schemes was changed to 60:40. “This coincided with the 14th Finance Commission chaired by Y.V. Reddy which recommended that 42% of tax should be allocated to states by the Central government,” he said. Mr. Modi is learnt to have requested Mr. Reddy to bring down the share of states and no prime minister had tried to influence a Finance Commission Chairman in this manner earlier, Prof. Ramkumar said.
Following Mr. Reddy’s refusal, cesses and surcharges were increased as they do not fall under the band of taxes that need to be shared with states. Between 2009-10 and 2023-24, ₹36.6 lakh crore has been collected by the Union government as cesses and surcharges. “Not a paisa of this has been shared with states,” Prof. Ramkumar said.
He also argued that despite the Centre’s share being abysmally low compared to the State’s in various schemes, the Prime Minister tries to take credit. “This is a political fight. Karnataka is an equally relevant sufferer in this story. The 15th Financial Commission recommended a grant to Karnataka and the Central government rejected it. The State lost a few 1000 crores,” he said.
Meeting of finance ministers
Every State has a grievance and on September 12, finance Ministers of all States of South India are meeting in Thiruvananthapuram to discuss how to address this, said Prof. Ramkumar. “Diversity is India’s soul. That is embedded in federalism and fiscal federalism is an important of that,” he added.
Activist Meenakshi Bali also spoke at the event.
Published - September 06, 2024 12:13 am IST
