The prime minister reminds me of the Tamil parable of the man who pinched the baby to make it cry, and then rocked the cradle to calm it down. He first creates a north-south divide by putting in place fiscal structures that favour the north and discriminate against the south, then denounces the opposition in Parliament for dividing north from south. He then sets out on a tour of southern Indian states to mollify the outraged people and has the gall to claim in Tamil Nadu, where his party is a non-entity, that the state is on “the cusp of a historical political change” that will bring it into the BJP net.
We would have long ago become the fifth largest global economy if the north had matched the south’s rates of economic growth. And our per capita income levels would be much higher than the global low at which we stagnate if the north had controlled its population growth and undertaken human resource development as effectively as the south, particularly Tamil Nadu, has done. The expatriate community of little Kerala contributes a disproportionately high share of remittances that have raised our nation’s foreign exchange reserves to over $600 billion. And it is the IT crowd from Telangana and Andhra Pradesh that dominates the Indian contribution to this fast-growing premier sector in the US and Europe, reflected in remittances to their home states. And, of course, the capital of Karnataka, Bengaluru, is the shining hub of our pioneering position in information technology and the export of services which drives our impressive foreign exchange earnings, while Tamil Nadu is the manufacturing hub besides being the nation’s granary.
Yet, it is principally these states of the south that are being severely discriminated against when it comes to raising national tax revenues and then distributing their share of the divisible pool to the states. Praveen Chakravarty, the top data analyst of the Congress, has shown that the taxpayer in states like TN and Kerala averages Rs20,000 yearly in contributing to the national tax kitty, but the average contribution of the Bihar taxpayer is a measly Rs4,500. And while “the average person in Bihar, UP or Madhya Pradesh gets back Rs260 for every Rs100 paid in taxes, the average Kannadiga gets back only Rs40”.
Is this fair? Does it not amount to fiscal punishment for outstanding economic performance? Does it surprise you that virtually the entire Karnataka cabinet fetched up in Delhi for an unprecedented demonstration to protest such discrimination? Or the statements emanating almost daily from other southern chief ministers?
It is the Modi government that has created this lop-sided fiscal structure. In 2014, it came into office just when the 14th Finance Commission submitted its report recommending that the states’ share of “the divisible pool” be raised from 32 per cent to a whopping 41 per cent. It presaged, everyone thought, the onset of genuine “cooperative federalism” in fiscal relations between the Centre and the states. But then, as pointed out by K.M. Chandrasekhar, Dr Manmohan Singh’s cabinet secretary, the Modi government perverted the process by resorting to “cesses and surcharges that do not have to be shared with the states”. They also ensured that two-thirds of the increase in states’ share came from adding, for the first time ever, plan expenditure to non-plan expenditure in measuring the states’ share. And sharply increasing the states’ share of financing centrally sponsored schemes. It is this trompe l’oeil (illusory trick) that has been passed off as implementing the 14th FC’s revolutionary recommendation.
“Cooperative federalism” has thus been rendered a farce, played out at the cost of all states but particularly the faster growing, better performing southern states, none of which is run by a “double engine sarkar”!
Aiyar is a former Union minister and social commentator.