April 02, 2018

North, South and Centre: This is us

Shankkar Aiyar, Visiting Senior Fellow at IDFC Institute, writes on the politics and economics of proposed changes in the 15th Finance Comission in this New Indian Express article. Excerpts:


"Economics is a political argument — Ha-Joon Chang


The essence of the pithy expression, articulated by the Cambridge economist, is playing out in India’s political theatre and on screens, angst propelled by the power of the networks. A narrative of north versus south, them versus us, Centre versus states with splices of rationality riveted with rhetoric has come to occupy centre stage.Context crafts the contours of dissent, discord and discourse. The immediate provocation is the change in the terms of reference of the 15th Finance Commission, set up to design devolution of funds to states. Population is and has been a determinant of allocation. Hitherto, Finance Commissions used the 1971 data. The 15th FC will use 2011 data. States with lower population assert that they will be shortchanged. 


On Thursday, Kerala Chief Minister Pinarayi Vijayan used Facebook and Twitter, no less, to state: “Presently, Kerala receives only a paltry 25 paisa for every rupee of tax it contributes to the Union, Tamil Nadu’s benefit is a mere 40 and Karnataka gets only 47 paisa. In comparison, Uttar Pradesh receives `1.79 for every rupee they contribute. The new move will further aggravate this disparity.”Karnataka Chief Minister Siddaramaiah, tagging the CMs of Kerala, Tamil Nadu, Andhra Pradesh, Telangana, Maharashtra and Puducherry, tweeted: “This will further affect the interests of the south: we need to resist.” DMK leader M K Stalin charged the Centre with unilateralism and wrote to 10 CMs, including those of the south, Punjab, West Bengal, Odisha and Delhi. 


Andhra Pradesh Chief Minister N Chandrababu Naidu, already in a face-off with the Centre, called out, “There is nothing called Centre’s or State’s money. It is the taxpayer’s money. Southern states contribute the maximum tax revenue to the Centre, but they are diverting the money to the development of the north.”Assertions aside, the actuality is that states with smaller populations and lower rates of growth in population could be affected. It is also true that use of data from 1971, when India had 54 crore people, in 2018, when the population is 131 crore, is irrational. Besides, population is only one of the factors—others, including progress in moving towards a replacement rate of population growth, will deliver compensatory dividends. "



Read the full article here.

Topic : State Capacity / In : OP-EDS
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