Regional disparity is growing in the country, says Sushil Modi

Patna: Regional disparity is growing in the country and despite an increase in the states' share in tax revenue, the percentage of allocation for Bihar has actually gone down, Deputy Chief Minister Sushil Kumar Modi said in Patna on Wednesday.

At a symposium on "analytical framework for fiscal federalism in India", Modi - who also holds the finance portfolio - underscored that Bihar has been at the receiving end of measures like the permanent settlement during the British Raj and the policy of freight equalisation in the years following independence.

The symposium was organised by the Centre for Economic Policy and Public Finance (CEPPF) here which is managed by city-based think-tank Asian Development Research Institute (ADRI).

"The state is also burdened by a very high density of population. Yet it has been performing well for the past many years and registering a high growth rate," the senior BJP leader said, making a strong pitch for greater central assistance to the state, at a time when demand for special category status has been revived by Chief Minister Nitish Kumar.

"Regional disparity - the gap between the rich states and the poor ones - is increasing. While the states' share in tax revenue has increased over the years, from 28.5 per cent under the 11th Finance Commission to 42 per cent in the 14th, if we look at the share of Bihar in the divisible pool, it has actually dropped from 14.6 per cent to 9.66 per cent during the period," Modi said.

He also said the GST, "under which both the centre and the state surrender their sovereignty with regard to tax collection, provides an ideal model of cooperative federalism and it should be taken note of by the 15th Finance Commission".

Echoing the Deputy Chief Minister's views on GST, Chief Economic Advisor to Government of India Arvind Subramanian said the new tax regime was "an important and revolutionary model of politics, administration and technology".

He also highlighted "low performance" of panchayats and municipal bodies on revenue generation front, with the remark "the closer a tier of government is to the people, the more unwilling it is to raise taxes".

"The second and third tiers of government (state governments and panchayats/municipal bodies) should strive to improve their revenue generation by ensuring a better delivery of public services," he added.

He also lauded Bihar's good economic performance and said the state should maintain a growth rate of at least 10 per cent for the next 25 years to catch up with the rest of the country.

Others who spoke on the occasion included CEPPF Director Shaibal Gupta and ADRI Director Prabhat P Ghosh.