Chennai: Chief minister J. Jayalalithaa on Monday made a strong case for “a simple, robust and equitable formula for distribution of resources amongst States” and even prescribed a positive formula for overall development of all States that would naturally reflect on national economy.
As per her formula, presented at a meeting she held with the 14th Finance Commission at the Secretariat here, one-third weight may be assigned to each of the following criteria—first, population based on the 1971 census; second, fiscal discipline including tax effort; and third, fiscal capacity distance. Many states would suggest elements of the formula that suit their own interests, she said, exuding confidence that the Commission would appreciate that her suggestion “is well-balanced and equitable”.
Regretting that the Centre’s attitude towards funding States’ plans has being “very condescending”, CM called upon the Commission to adopt a “bold approach” to effect “the paradigm shift needed at this juncture” instead of being “incremental” and “self-limiting”. The Commission, she said, was now “at the cusp of history” having the “opportunity to re-order Centre-State financial relations and make them reflect the contemporary reality of the political economy”.
Reiterating that TN did not receive its due share in the Central Plan funds, CM pointed out that the state got 4.328 per cent in fund flow against 5.96 per cent population share (2011 census). “Not only does this design of fund flow penalise a better performing state, it also raises a very serious doubt that there is a sinister conspiracy to consciously discriminate against some states in matters of plan allocation”, CM said. n P4
Next: Jaya tells Finance Commission not to fall into political trap
Jaya tells Finance Commission not to fall into political trap
Chennai: Chief minister J Jayalalithaa said Tamil Nadu has high proportion of its population in the working age group and her ambitious Vision-2023 eyeing investments of Rs 15 lakh crore in social and economic infrastructure was sure to deliver long-term development all round.
“The state urgently needs fiscal support at this crucial stage of development. Any tapering of transfers at this stage would adversely affect long term growth prospects,” she said at a meeting with the 14th Finance Commission headed by former RBI Governor Y V Reddy, which is on a two-day visit to Chennai.
Referring to the report submitted by the Expert Committee headed by present RBI Governor Raghuram Rajan to evolve criteria for identifying backward States and for devolution of funds from the Centre to such states, CM told the Commission to “reject outright” the report.
“This hurriedly drafted report appears to be a thinly disguised attempt to provide an intellectual justification to the political objectives of the mentor of the exercise. The Commission should independently make its recommendations without getting pressured by such misleading and unnecessary inputs,” she said.
On the impact of the proposed Goods and Services Tax, she said there would be a “huge permanent revenue loss” the GST was likely to cause to a manufacturing and exporting state like Tamil Nadu.
“It was in this context that I made my suggestion of an alternative radical approach.
The levy, collection and appropriation of the substitutes for VAT, Central Excise Duty and Service Tax within a state should be delegated completely to the state machinery with the Central machinery focusing on inter-state taxation,” she said.
