Inter-State tussles
The States cannot have a common position as they are at different stages of development and with vastly different resource positions.
The rich States have greater resources while the poor ones need more resources in order to develop faster and also play catch up.
So, the Finance Commission is supposed to devolve proportionately more funds to the poorer States.
Unfortunately, despite the efforts of the 15 Finance Commissions so far, the gap remains wide.
The rich States, which contribute more and get proportionately less, have resented this.
What they forget is that the poorer States provide them the market, which enables them to grow faster.
The poorer States also lose much of their savings which leak out to the rich States, accelerating their development
Centre-State relations
The Centre allocates resources to the States in two ways.
First, on account of the Finance Commission award.
Second, the Centre is notional while the States are real.
Thus, all expenditures by the Centre are in some State.
The amount spent in each State is also a transfer.
This becomes another source of conflict.
Expenditures lead to jobs and prosperity in a State.
Benefits accrue in proportion to the funds spent.
As a result, each State wants more expenditure in its territory.
The Centre can play politics in the allocation of schemes and projects.
For instance, it is accused of favouring Gujarat and Uttar Pradesh.
The Opposition-ruled States have for long complained of step-motherly treatment.
To get more resources, the States have to fall in line with the Centre’s diktat.
Issues in federalism
This has taken a new form when the call is for a ‘double engine ki sarkar’, i.e., for the same political party to be governing at the Centre and the States.
It is an admission that the Opposition-ruled States will be at a disadvantage.
This undermines the autonomy of the States and also weakens federalism.
The Sixteenth Finance Commission should try to reverse fraying federalism and strengthen the spirit of India as a ‘Union of States’.
This is not only a political task but also an economic one.
The Commission could suggest that there is even-handed treatment of all the States by the Centre and also less friction among the rich and poor States when proportionately more resources are transferred to poor States so as to keep rising inequality in check.
To reduce the domination of the Centre over the States, the devolution of resources from the Centre to the States could be raised substantially from its current level of 41%.
The Centre’s undue assertiveness undermines federalism.
Funds with the Centre are public funds collected from the States and spent in the States
It is time that the utilisation of the country’s resources is jointly decided by the Centre and the States on the basis of being equal partners
COMMENTS