A conclave for federalism
In a first-of-its-kind initiative, the finance ministers of southern states met in Thiruvananthapuram on Tuesday. This rare camaraderie came out of the terms of reference (ToR) of the 15th Finance Commission, which has recognised population as a critical criterion for redistribution of taxes. What is more, it is set to use demographic data from the 2011 Census while making recommendations for the next five-year period, beginning 2020. Previous commissions have been using the 1971 Census as the benchmark. The southern states fear that if the new ToR is implemented, they will lose thousands of crores from the Centre’s revenue devolution.
In other words, the progressive states are being penalised for having done well on the human development indices, especially effective birth control, which the Centre has been pushing all these years. Their loss is the gain of the BIMARU (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) states. Kerala Finance Minister T M Thomas Isaac, who took the initiative to convene the meeting, has said Kerala alone would lose `20,000 crore over the next five years while Tamil Nadu would take a hit of `40,000 crore. Needless to say each of the BIMARU states stands to gain between `6,500 crore and `10,000 crore.
The new proposal, it is feared, would also result in total erosion of the fiscal elbow room for the states to borrow funds from the market. Surely, the ToR would prevent the Commission from fulfilling its Constitutional responsibility by embracing these arbitrary guidelines. This is all the more relevant as GST has already hemmed in the resource mobilisation powers of the states.
The first conclave is as much a subtle political play of anti-BJP parties. No wonder, Tamil Nadu and Telangana, clearly averse to antagonising the NDA government, stayed away from the meet. Isaac’s claims to the contrary notwithstanding, nobody can deny there is some political muscle flexing happening here. After all, it does boil down to the relevance of federalism in contemporary Indian polity.