Prime Minister Narendra Modi tried to get the 14th Finance Commission to lower the share of revenue passed on to the states after coming to power in 2014, investigative group Reporters Collective said, citing public comments by one of the officials involved in the negotiations.
According to BVR Subrahmanyam, then joint secretary at Prime Minister’s Office, the then chairman of the Finance Commission, YV Reddy, refused to accede to Modi’s demands, according to the report.
As a result, the 14th Finance Commission subsequently raised the share of states in central revenue to 42% from 32%.
Subrahmanyam, who is currently the CEO of Government of India’s planning body NITI Aayog, was speaking at a conference organised by the Centre for Social and Economic Progress (CSEP), a non-govermental think tank.
The 14th Finance Commision was formed a year before Modi was elected as the Prime Minister.
Earlier, Modi had, as the Chief Minister of Gujarat, campaigned for devolving 50% of central funds to state governments.
Under India’s federal system, the Centre ends up receiving the lion’s share of taxes and other revenues extracted from the citizens, while much of the day-to-day administrative work is the responsibility of the states.
To address the imbalance, the constitution calls for the setting up of an independent ‘Finance Commission’ every five years to apportion the revenue between the Centre and the states over the next five years.
The exercise is usually accompanied by impassioned appeals from state governments for more funds.
Subrahmanyam said Reddy steadfastly stood his ground, forcing the central government to rework the budget in just two days by cutting down allocations to ministries and departments where state spending was also involved.
Later, Modi had highlighted the increase in states’ share as one of the positives of his government’s economic policies.