State worst hit, but still silent on declining Central funds

The changed weight of factors by the 14th Finance Commission to distribute the Centre’s share of funds to the states is certain to hit Tamil Nadu whose share of Central funds is already very low compared to the revenue it has generated to the Union government. 

The new base of taking the 2001 census instead of the 1971 one is likely to bring down Tamil Nadu’s share from the average increase of 173 per cent at the national level. The state’s funds will see a rise of only 121 per cent as 14th Finance Commission had recommended Rs 1.59 lakh crore to the state for the five-year period from 2015-to 2020, while the share of northern states is above the national average. 

As per the budget estimates of 20182019, the share of Tamil Nadu in the Central taxes is Rs 37,707 crore. The grants-in-aid including GST compensation will be Rs 20,626 crore for the same financial year.

The GDP share of Tamil Nadu in the country is Rs 15.96 lakh crore which is ten times the central allocation of Rs 1.59 lakh crore proposed by the 14th Finance Commission. Tamil Nadu is one among the four states which contributes 50 per cent of the total GDP in the country and its share of Rs 15.96 lakh crore (works out to about 14 per cent, next only to Maharashtra.)

It also contributes about Rs 90,000 crore in the form of corporate, income and service taxes, besides customs and excise duty. 

However, the Raghuraman Rajan committee had classified Tamil Nadu as a developed state due to its ability to generate revenue on its own, adding that its reliance on the Centre for funds is less. Tamil Nadu was the fourth poorest state in 1960 but had climbed to the second place in 2014.

State Finance Minister O Panneerselvam attributed all the achievements to the Dravidian movement without much patronage from successive Central governments. “It is clearly evident that we have grown on our own.” He also said he had raised the issue of fund allocation to Tamil Nadu at the meeting of Finance Ministers held in Delhi. There, he had said that allocation of funds to a state must be based on the revenue it generates and the criteria of fund allocation should not punish the performing states.