New Delhi witnessed a different kind of protest over the past two days. It was directed against the Union government and was staged by the state governments, with their chief ministers, Cabinets and legislators as participants. Their demands were almost the same — give a fair share of the Central revenues, stop discriminatory practices, allow raising of resources within means and observe federal principles in governance. It was the Karnataka team on Wednesday and Kerala on Thursday. They were joined by other Opposition parties and CMs.
Karnataka’s biggest grouse is the formula adopted by the 15th Finance Commission in deciding awards for the states. It resulted in a loss of Rs 1.87 lakh crores which included a loss on account of devolution and others in the last five years. Karnataka contributes the second largest share in taxes but is not compensated adequately, its chief minister Siddharamaiah held. The state gets a poor Rs 13 for collecting Rs 100 as tax. The Union government has an obligation to set right this anomaly, Mr Siddaramaiah said.
The Kerala government is riled up about the curbs the Union government has imposed on its borrowing as well. While every state and the Union government have the responsibility to go by the Fiscal Responsibility and Budget Management Act, the latter, without meeting its own obligations, imposes conditions that make borrowing next to impossible, said chief minister Pinarayi Vijayan. The Kerala government points out that it has limited fiscal deficit to 2.44 per cent of the GSDP or gross state domestic product, much below the mandated three per cent, even while the Union government has constantly breached its limits. It also complains that the big investments it makes in developing human capital are not taken into account when the Union government decides formulae for Centrally-funded projects. A state which meets 80 per cent of its spending from its own resources cannot be accused of being inefficient. Mr Vijayan said the agitation is for protecting fiscal federalism, as the public debt of a state is on the state list and yet the Union government finds devious ways to legislate on it.
The Tamil Nadu government has come out in support of the agitations by its neighbours. Chief minister M.K. Stalin, who shares most of the grievances aired by Mr Siddaramaiah and Mr Vijayan is on record for saying that the intent of the Union government seems to be to cripple the states’ ability to raise resources and fund crucial developmental initiatives as per their policy priorities. The Union government misuses its powers to impose restrictions on deficit financing, Mr Stalin said. The Tamil Nadu CM also protested the Centre’s imposition of what he called arbitrary curbs on borrowing.
It is imperative that the nation observes fiscal prudence and the states play a big role in it. It must be a collective and democratic effort, and should go by what Prime Minister Narendra Modi often calls cooperative federalism. However, instead of sitting with the chief ministers and finding out practical solutions, Mr Modi and finance minister Nirmala Sitaraman are in denial. They are calling the agitations “divisive” and “separatist”. The Union government must make an honest effort to understand the issues flagged by the states.
