Rejecting the Raghuram Rajan Committee report on State’s development index, Kerala Chief Minister Oommen Chandy raised serious concerns regarding the recommendations of the committee on allocation of funds for development.
“We will strongly urge the Government of India not to accept the recommendations of the committee and to leave the devolution of resources to the Finance Commission and Planning Commission as at present,” said Chandy in a letter to Prime Minister Manmohan Singh. The letter said that the Kerala Government is deeply concerned by the approach followed by the committee in respect of the allocation of funds to the state.
“The report of the committee itself mentions that its recommendations may be used to allocate some of the development funds that are allotted by the Centre to the states. Further, the committee mentions in the report that the findings are not intended to replace existing methodologies but should be thought of as one that will channel some of the fund allocations.
“It is important to remember in this context that there is no uncommitted corpus of funds with the Centre that can be allocated as recommended by the committee,” he said in the letter.
The Chief Minister pointed out that devolution of tax proceeds and grand-in-aid are determined by the Finance Commission in accordance with the provisions of the Constitution.
“For devolution of Plan funds there are established methods developed over the last several decades by the Planning Commission after exhaustive consultation with the states. The present committee has not held consultation with the states or other stakeholders and its report has been prepared over a very short time of four months. It will be totally against the provisions of the Constitution, the concepts of fiscal federalism and existing scheme of devolution of development funds by the Planning Commission,” the letter said. Kerala also questioned the methodology followed by the committee and termed it as seriously flawed as it does not include major economic factors.
“The note of dissent submitted by Dr Shaibal Gupta has brought some very relevant issues. The view expressed by Gupta that the choice of monthly per capita consumption expenditure (MPCE) in place of per capita GSDP is out of place. MPCE does not reflect production and income derived from production. In states to which there is inflow of foreign and domestic remittances as in Kerala MPCE will give a distorted picture of level of development,” the Chief Minister said. He said that the report also does not take into account the fiscal capacity of the states.