Date:09/12/2008 URL: http://www.thehindu.com/2008/12/09/stories/2008120954660500.htm

Tamil Nadu - Chennai

Economist favours change in the pattern of funds transfer to States

Special Correspondent

States that do not have enough tax resources should be helped by the Centre: Raja J. Chelliah

— Photo: K.V. Srinivasan

SHARING A POINT: (From left) Raja J. Chelliah, Chairman Emeritus of the Madras School of Economics, Finance Secretary K. Gnandesikan, Finance Commission Member Atul Sarma and MSE Director D. K. Srivastava at a seminar in Chennai on Monday.

CHENNAI: The transfer of funds from the Centre to States should be redesigned, so that non-performing States are not rewarded at the cost of those that are doing well, said speakers at a seminar.

Inaugurating the seminar on ‘13th Finance Commission: Issues of Southern States,’ organised by the Madras School of Economics and the Tamil Nadu government, Raja J. Chelliah, Chairman Emeritus of the Madras School of Economics, said States that did not have enough tax resources should be helped by the Centre.

Though the share of the Central taxes for poor and non-performing States had gone up, their relative growth did not increase. On the other hand, the share of such good performing States as Maharashtra and Tamil Nadu had dipped. He wanted the seminar to deliberate upon this point and make suggestions to the Finance Commission.

D.K. Srivastava, Director of the Madras School of Economics, said all four southern States were classified as middle-income States. They were contributing more than a quarter of the output in India. Their tax bases were increasing and their contribution to the Central taxes growing correspondingly. But, their share of tax devolution and in the grants given by the Centre had been coming down. This had significantly dented their capacity to offer services. So the pattern of fund transfers should be redesigned.

Rajiv Ranjan, Secretary, Commercial Taxes Department, and Officer on Special Duty, Finance Commission, Tamil Nadu, said the deliberations would help the State prepare its memorandum to the Commission. “The whole issue has to be analysed in the perspective of the southern States.”

Atul Sharma, Member, 13th Finance Commission, said regional disparities among the States were widening, with certain States doing well. The better-run States, he said, were demanding a change in the allocation formula.