Central tax hike brings acche din for non-BJP ruled states

Parliamentarians sitting on opposition benches in both the Houses of the parliament has a reason to thank Prime Minister Narendra Modi for bringing acche din for the states ruled by parties such as Congress, TMC, SP and JD (U). Shocked! Yes it’s true. The decision of Modi government to increase the share of states in central tax pool from 32 per cent to 42 per cent after the recommendations of 14th Finance Commission (FFC) has acted as boon for non-BJP ruled states.

The NDA government’s move in the backdrop of giving a fillip to cooperative federalism policy is proving a windfall for non-BJP ruled states of Bihar, Uttar Pradesh, West Bengal, Kerala, Arunachal Pradesh, Himachal Pradesh, Uttarakhand and Karnataka. While the states under the rule of BJP such as Haryana, Gujarat, Rajasthan, Maharashtra, Madhya Pradesh, Chhattisgarh have got lesser benefit in terms of per capita gains.

According to Economic Survey 2014-15, Haryana stands at the last in category of lowest per capita income with just Rs 628, while Congress-ruled Arunachal Pradesh has benefitted Rs 40,359 per person. Similarly, Gujarat and Maharashtra has benefitted marginally as both the states has got a hike of Rs 753 and Rs 951 respectively into their kitty from central tax pool. The other top benefiters include Congress ruled Himachal Pradesh and Kerala gaining Rs 12,430 and Rs 2,846 respectively while JD (U)-ruled Bihar has profited Rs 1,276, Samajwadi Party ruled Uttar Pradesh getting Rs 1,232 and Mamata Banerjee’s West Bengal benefitting Rs 1,831.

Hailing the move, economists have put the onus on states. “No doubt it’s a good decision as country is now moving from quasi to cooperative feudalism. With this, now states would not be in a position to blame centre for ‘sitting’ on their funds,” said Prof Subrata Mukherjee of Delhi University.

Countering Mukherjee, noted economist Prabhat Patnaik has expressed reservations over the recommendations of the the FFC. “The Modi government is playing hide and seek game with fund allocation to states. At one side the Centre increased the states share in union tax pool, while on the other side they have reduced gross net worth, which will affect vulnerable states like Tripura,” said Patnaik, who taught Economic Studies and Planning in the School of Social Sciences at Jawaharlal Nehru University.

Notably, with FFC report Uttar Pradesh has got Rs 66,622 crore in the present fiscal and will get Rs 94,313 crore more in the next fiscal, while Bihar has got Rs 36,963 crore in this year and will get Rs 50,000 crore in next financial year. It’s worth mentioning that with this move the states will get about Rs 2 lakh crore more. In the current fiscal states have got Rs 3,37,808 crore while after FFC recommendations the states would get Rs 5,23,958 crore.