Centre not fair to South? Tharoor and Thiagarajan discuss

Brut India

South India contributing more to GDP, but getting less share of taxes? Two leading politicians from the South, both opposed to the governing BJP, spoke on federalism at the Mathrubhumi International Festival of Letters.

Transcript

00:00For every one rupee of tax contributed by Uttar Pradesh,

00:04that state receives one rupee seventy-nine paise back from central taxes.

00:09Tamil Nadu puts one rupee and we get thirty to thirty-five paise back.

00:12So it's not the money that we begrudge, it's the lack of progress.

00:16It's like throwing money down a well.

00:21One thing that's become clearly apparent,

00:23that struck home to me was when you had the finance commission.

00:28For the first time, this last recent finance commission was asked to take into account

00:35the census of 2011 rather than the census of 1971 in determining allocations.

00:42How did that affect your state and my state and other states?

00:46Just as redistricting of MP seats has been frozen since 1976,

00:54precisely because you didn't want to penalize those states

00:58that achieved the population control targets set by the union government,

01:03by the leadership of the union government.

01:05Similarly, the notion that you should allocate funds based on the population of today

01:11or more closer to today, then rewards those who have not been able to achieve population control

01:18and penalizes those like Kerala and Tamil Nadu who have tremendously succeeded

01:23where our total fertility rates are below replacement, below two.

01:26But if the goal of net transfers is eventual equality or leveling of outcomes,

01:34then our finance commissions have been spectacularly failing at their job.

01:39For every one rupee of tax contributed by Uttar Pradesh,

01:43that state receives one rupee seventy-nine paise back from central taxes.

01:48For every one rupee of tax contributed by Karnataka, that state receives forty-seven paise back.

01:55So the question that Mr. Siddharam I asked when he was chief minister is,

02:00what is my reward for development?

02:02And obviously there isn't any.

02:04Kerala meets seventy-two percent of its expenses from its own taxes,

02:09only twenty-eight from central taxes.

02:12Bihar, it's almost exactly reverse, twenty-three percent from their own taxes,

02:17seventy-seven percent from central taxes.

02:20And so we have a situation where say Tamil Nadu has a state budget

02:24that reflects of course only a small percentage of its tax earnings.

02:29UP has a larger state budget even though its economy is actually smaller than Tamil Nadu's

02:34because it's getting more money from elsewhere.

02:36Obviously doesn't that put a strain on the federal idea

02:39because the increasing perception in the south would clearly seem to be

02:44that we're getting the raw end of the financial deal.

02:46Of course that's problematic in the short term.

02:52It's even more problematic in the long term.

02:54If you take Tamil Nadu for example, at one point we were seven,

02:57seven-and-a-half percent of the country's economy.

03:01We were seven, seven-and-a-half percent of the population.

03:04And our share of the devolution of the horizontal between the states was seven,

03:08seven-and-a-half percent.

03:10In twenty, twenty-five years we've gone down to under six percent of the population,

03:15ten-and-a-half to eleven percent of the economy,

03:18and our devolution is down to four percent.

03:20So in the long term, this trajectory worries me.

03:24If we go down this path, in another fifteen or twenty years,

03:27we'll be fourteen, fifteen percent of the GSDP or GDP,

03:32and we'll get back like two percent.

03:33At that point, the debate becomes even more charged.

03:37I am much more concerned, you know, as a patriot, as a citizen,

03:41I'm much more concerned about what happens to all this money

03:44when it goes to the poorer states.

03:48Why is it not leading to development?

03:50Why… I mean, how is it that with less and less money back,

03:54we are still able to achieve…

03:57I'm not saying we're fantastic, but we're in the right direction,

04:00and our people's lives get better, there are more roads,

04:03there are better hospitals, there are, you know,

04:06better job creation platforms where global industry comes.

04:12Why is it that that's not happening in places like Bihar and UP?

04:15Because very stark, right?

04:17The data is a bit dated about two years or three years,

04:21but in Bihar, the average age is nineteen.

04:24In Tamil Nadu, it's thirty-four.

04:26In Bihar, the average education is elementary school dropout.

04:30In Tamil Nadu, it's high school graduate.

04:32In Bihar, the per capita income is about half the union average.

04:37In Tamil Nadu, it's double.

04:39So we have already diverged to a point where all of this money transfer,

04:43because if you say UP gets back one-seventy,

04:45Bihar gets back about three-forty-five.

04:47For one rupee in, three rupees forty-five back.

04:50Tamil Nadu puts one rupee in, we get thirty to thirty-five paisa back.

04:53So it's not the money that we begrudge.

04:56You know, we live in one country, we want everybody to grow.

04:59It's the lack of progress.

05:01It's like throwing money down a well.

05:03What is happening that this money is not able to achieve outcomes?

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