|
ECONOMY:
ELEVENTH FINANCE COMMISSION
No
Comparisons Please
Then
there are other flaws in comparing the two commissions. Unlike the EFC
that has for the first time given a unified devolution formula for all
Central taxes, the TFC had given three separate formulae-one for distribution
of additional excise duty (imposed only on the sale of sugar, tobacco
and textiles), another for distribution of a portion of Union excise duty
only for states with high budget deficits, and yet another for the distribution
of the remaining tax revenues. Considering these variations, the comparisons
between the TFC and the EFC awards are only partially accurate.
On being
pro-poor the EFC stance is clear. Explains Khusro: "We give money
to states to remove-not perpetuate-poverty. And why on earth should anti-poverty
measures not be a priority?" Especially for finance commissions whose
primary charter is to promote economic equality. Says D.K. Srivastava,
special adviser to the EFC and professor at the NIPFP: "A finance
commission's first concern is to bring all states on an equal footing
in the provision of public services. Incentive for performance is important
too but not as much as equality." Also it is not that performance
has been totally glossed over. Compared to the TFC's 10 per cent, the
EFC has given 12.5 per cent weightage to tax mobilisation and fiscal discipline
in allocating share.
While the
rich states complain of resources being transferred to the poor, they
probably do not realise that resources also flow from poor states to rich.
This happens through multiple channels. Banks, for instance, mobilise
savings from all over the country but lend predominantly to projects in
rich states. A recent study done by the Planning Commission's Kurian shows
that the share of the eight richest states in total bank deposits was
54.4 per cent, but their share in bank credit was 64.5 per cent. A similar
flight of capital from poor to rich states also takes place through financial
institutions.
If the rich
and poor states have such differing positions, how would they converge?
The meeting point could be monitoring, or what rich states would like
to call "reward". Poor states must make productive use of the
larger percentage share that they get from the finance commission. If
they don't, they should get less resources in the future. That's exactly
what the EFC is going to suggest in its supplementary report due by August-end.
Even though finance commissions are not and should not be monitoring bodies,
an additional term of reference assigned to the EFC on April 28, 2000
required it to suggest what grants to states can be linked to performance
on stipulated parameters.
If a monitoring
process does come into effect, it will help the EFC attain its rather
ambitious projections. The commission has estimated that all states in
the country will wipe out their revenue deficits by the year 2004-2005.
That will be quite a shift from the present, when almost every state in
India has a large revenue deficit. In a way, the ruckus kicked up by the
rich states over the unbridled flow of funds to the poor states may eventually
strengthen the EFC's hands. For, the high drama by the rich states has
sent a message to the laggards that there will be no free lunches in future.
That is good news for everybody-the finance commission, the states and
the country.
-with
Ramesh Vinayak, Rohit Parihar, Sanjay Kumar Jha, Subhash Mishra
and Stephen David
Pg1
| Pg2
Top
|
The
stock markets are humming, and it's feel-good time once again, writes
INDIA TODAY Associate Editor V. Shankar Aiyar in 
