The recent protests by Tamil Nadu, Karnataka and Kerala against New Delhi’s “step-motherly treatment” in tax-sharing have created an uproar. The three southern states have knocked on the Centre’s door, alleging discrimination in the allocation of federal funds. They have claimed that the distribution from the central kitty has weakened cooperative federalism.
They are demanding their rights, asking for their fair share in the devolution of taxes. The ruling dispensation in Tamil Nadu was livid when its request for Rs 37,000-crore aid following the December 2023 cyclone and floods fell on deaf ears. M K Stalin blamed the Centre, saying that it has curtailed the state’s authority over funds, education and law. Karnataka, which has been at loggerheads with the Centre ever since the new government was seated, claimed that New Delhi purposefully reduced the state's share of tax revenues. Kerala, which is facing a serious fund crunch, has squarely blamed it on the Centre’s discrimination.
The two industrialised states of Karnataka and Tamil Nadu are near the top of the tax collection chart, with Maharashtra taking the top slot. But they receive little in return, as most funds go to underdeveloped, populous states in the North. It is true that ever since GST has been introduced, state governments’ revenue sources have been choked. Most of them have ended up with lower-than-expected revenue growth, forcing them to borrow more to expand capital outlays.
It is a Catch-22 situation: high debt eats into their funds, leaving barely anything for capital expenditure, which in turn is vital for growth. The Centre has raised concerns over off-budget borrowing by state government arms. States, mostly those from the South, are sandwiched between the curbs on raising debt on the one hand, and abysmal shares from the central kitty on the other.
What the southern states run by opposition parties demand is an open dialogue and redress. The Union finance minister has tried to reason it out, saying that devolution happens according to the Finance Commission’s recommendations. But the allegation from some quarters that the opposition is creating a North-South divide is absurd. The fight for a federal democracy should not be viewed as a bout for regional divisions. Southern states are not demanding freedom from India, but the freedom to build the nation as enshrined in the Constitution—with a strong Centre-state bond.