Taxing issue: Southern states criticise the allocation formula as ‘unfair’

Bengalureans weigh in on the controversy surrounding central tax devolution with Dese Gowda.
Taxing issue: Southern states criticise the allocation formula as ‘unfair’
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Calls for more equitable development across the country, balancing contributions with progress...Bengalureans weigh in on the controversy surrounding central tax devolution with Dese Gowda, as Southern states criticise the allocation formula as ‘unfair’

Harish Bijoor, business guru

I believe the formula for allocating tax revenue to the states needs revisiting. The distribution of net tax proceeds between the Centre and the states must prioritise equity, though states cannot expect a direct match between their contributions and receipts. However, the grievances of some states, particularly in the South, suggest that adjustments are necessary. Southern states, which contribute more to the national GDP, feel shortchanged. For example, Karnataka receives only 15 paise for every rupee it contributes, while Uttar Pradesh receives 2.75 rupees. Population is a key factor in the current formula and should remain so, as larger populations require more resources. Ultimately, we are one nation, and we must take care of the entire country.

Santosh S, IT professional

Population control policies were well implemented in the South decades ago, but it feels like these states are now being penalised for their success, while less efficient Northern states benefit from larger allocations based on population. We see inefficient use of funds in the North, where projects often collapse due to poor execution. The allocation imbalance is visible in central projects taking a back seat in Southern states, while critical areas like social security, health, and employment are neglected. If this continues, it will affect future growth and access to services like healthcare, which is already in crisis across India. Education in the South is flourishing, but the North lags, with rigged boards and poor outcomes. While tax revenue parity is becoming more visible, it’s not the root cause of regional disconnect – it’s the feeling that the South is punished for its progress, while Northern states benefit from inefficiency.

Vinay Kumar, consultant

We are a federal entity, and the principle of federalism is to ensure equitable distribution for economic justice. However, it seems this ideal isn’t being realised, as richer states continue to give more without seeing proportional development in poorer states. The imbalance is becoming unsustainable and risks leading to greater conflicts. While the goal is equality, we’re seeing growing inequality, and there needs to be a reevaluation of how resources are distributed to achieve true progress. In states like Karnataka or Tamil Nadu, which perform better on development indices, this imbalance is even more apparent. Beyond language and regional identity, the economic disparity is fuelling discontent and requires urgent attention.

Rithwik Simha, thespian

Southern states are only asking for their fair share of tax revenue, not a reward, and I don’t understand why this has become such a contentious issue. The South deserves a better share because we contribute more but receive less in return, which is insufficient for our development needs. While it’s true that richer states must contribute to the development of poorer ones, the current formula is outdated, and Southern states need more to address their infrastructure and growth. The argument that money is being wasted on ‘freebies’ is politically loaded, as all states and the central government engage in welfare measures. This debate should be centred on economics, not politics, to ensure a fair and balanced approach for all regions.

Sangeetha DR, information security professional

The tax revenue distribution is extremely unfair given the fact that southern states are generating more revenue. Our states also have underdeveloped places that need funds. The funds required for our state’s development should be allocated to us first and the remaining can be distributed. Allocating more funds to the states that are neither contributing well to the nation’s revenue nor being developed just means that the money is not being rightly used. The migration of people to Southern states in search of jobs is making the major states here populous and the current infrastructure is not supporting this population. The other states must create jobs and focus on generating revenue to be self-sufficient instead of depending on other states.

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