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Times of India | Why resource distribution is creating a North-South divide
By Sarthak Pradhan & Pranay Kotasthane
Over the last few days, there have been calls to form an economic alliance of southern states for equal resource distribution. Chief ministers from states such as Karnataka, Kerala, and Tamil Nadu held demonstrations in New Delhi to express their discontent. The Karnataka chief minister claimed that the current system for distributing resources among states puts states like Karnataka at a disadvantage while favouring states in the North with uncontrolled population growth. While the states’ concerns are valid, this focus on the horizontal distribution of tax resources is misplaced. Instead, the states should advocate for an enlargement of the divisible pool by calling for a curtailment in Union cesses and surcharges. Here’s why: Read the full article here.
Why the south-vs-north debate is a flawed way to analyse the 15th finance commission formula
If the objective of general-purpose transfers is to enable comparable levels of public services at comparable tax rates, it is only fair that the latest population data be used. Justifying the use of dated population data (1971 census) assumes that general-purpose transfers are levers for family planning. They aren’t. Family planning and population control are better managed through interventions on the expenditure side of budgets.The idea of punishing individuals elsewhere in the country just because these areas continue to languish goes diametrically against the Indian Republic’s spirit. If this argument of southern-versus-northern states is followed through, a direct corollary would be to also oppose money flows from Bengaluru to Bidar, or from Whitefield to south Bengaluru.
If this argument of south-vs-north is followed through, a direct corollary would be to also oppose money flows from Bengaluru to Bidar or from Whitefield to south Bengaluru.
The terms of reference for the 15th finance commission (FC) have come under attack from many quarters in the last few weeks. Of these, the most prominent line of attack is that using 2011 census data will end up hurting the interests of the southern states.Since their population is one of the factors considered while distributing tax revenues among states, some say the southern states will be punished for controlling their population. To resolve this moral hazard, a few southern states are demanding that the dated 1971 census be used for the FC’s revenue distribution formula.But this claim and the ‘north-vs-south’ debate sidestep other substantial flaws in the terms of reference for the 15th FC.Read more here>