A letter sent to ten Chief Ministers and the Prime Minister by Dravida Munnetra Kazhagam (DMK) leader (and now Tamil Nadu CM) MK Stalin, questioning the ‘ill-conceived’ terms of reference of the Fifteenth Finance Commission, revealed how an apparently thoughtless, but conceivably deliberate, decision by the Modi government opened a Pandora’s Box with incalculable consequences for the country.
The Finance Commission is one of the less well-known institutions of our governing system. It is appointed every five years to review and decide how the country’s revenue from taxation will be apportioned between the states. The Finance Commission uses various criteria to determine this, including each state’s percentage of the national population. But for more than four decades, it has based itself on population figures from the 1971 census.
The thinking behind this policy was clear: it was based on the sound principle that the reward for responsible stewardship by a state of demography and human development, could not be political disenfranchisement. While there is some logic to the argument that a democracy must value all its citizens equally — whether they live in a progressive state or one that, by failing to empower its women and reducing total fertility, has allowed its population to shoot through the roof — no federal democracy can survive the perception that states would lose political clout if they develop well, while others would gain more seats in Parliament as a reward for failure.
This is the carefully balanced arrangement that the Modi government carelessly caused to be undone by instructing the Finance Commission to use the 2011 census figures instead of the 1971 figures, leading Stalin to erupt. Already, when the (earlier) Fourteenth Finance Commission had been asked to take the 2011 figures into account (while still relying principally on 1971), a south Indian analyst, Nilakantan RS, wrote, “India rewards the brute demographic advantage of north India over a state’s performance.”
Such concerns have resurfaced, and Stalin was not alone in expressing his unease. Then-Karnataka Chief Minister Siddaramaiah articulated a strong case, and Pawan Kalyan, the film star who founded a political party in Andhra Pradesh, did so as well. “Is the success of south Indian states going to be used against them by Union of India?” he tweeted, expressing “genuine concern that population-based formula for sharing tax revenues between states & Centre would hurt south Indian states.” Nilakantan wrote that the Fifteenth Finance Commission was worse than the Fourteenth, ‘a stunning rebuke of success’, and ‘the future of the Indian union may well unravel based on its decisions’:
The bind that Tamil Nadu and Kerala, in particular, find themselves in is: they are at a stage where their success is being used against them by [the Union government], which is seeking to aggressively redistribute resources based on brute demographic might. These states made improvements in health to find that the reward for that is to have less money to spend on health; their improvements in education meant they’d have less money to spend on education.
Siddaramaiah’s post went much further, raising a whole host of issues relating to Indian federalism, from Karnataka’s ancient history and its right to its own flag, to the importance of honouring the Kannada language and the unfairness of the current tax distribution system: “Historically, the South has been subsidizing the north. …For example, for every one rupee of tax contributed by Uttar Pradesh, that state receives 1.79. For every one rupee of tax contributed by Karnataka, the state receives 0.47. While I recognize the need for correcting regional imbalances, where is the reward for development?” He added that population was an important criterion for the apportionment of central taxes. “For how long,” he asked, “can we keep incentivizing population growth?”
The fact is that whereas Tamil Nadu’s Gross State Domestic Product is Rs 15.9 lakh crore, Uttar Pradesh’s is Rs 14.8 lakh crore, but the total budget expenditure of Tamil Nadu for 2018-19 was Rs 1.1 lakh crore, while that of Uttar Pradesh’s was Rs 1.5 lakh crore — a 36% higher budget outlay than Tamil Nadu despite being a 7% smaller economy. Other iniquities are measurable too: Karnataka meets 72% of its expenses from the state’s own taxes; Bihar gets 77% of its expenses from central taxes. In other words, unlike most federal systems, India’s revenues are going disproportionately to its worst-performing states, those with poor levels of education, high rates of fertility and population growth, while the high-performance states in the south get short shrift.
These are important questions that the rest of India can ill afford to ignore. The states of the ‘cow belt’ — the Hindi-speaking heartland, once called the BIMARU states — have comprehensively failed to improve their development indicators, notably relating to female literacy and women’s empowerment. As a result, their population growth has outstripped that of the southern states. And thanks to the Finance Commission’s new formula, that makes them eligible for a larger share of tax revenues.
But the country should pay attention to the greater dangers. While northern states like Bihar, Jharkhand, Madhya Pradesh, Rajasthan, and Uttar Pradesh had a decadal population growth rate of over 20% between 2001 and 2011, southern states like undivided Andhra Pradesh and Telangana, Kerala, Karnataka, and Tamil Nadu, grew at less than 16% in the 2001-11 period. My own state of Kerala has the country’s lowest growth rate (4.9% over the decade of 2001-11, and dropping, it is estimated, to negative growth in this year’s census). That is one-fifth of Bihar’s growth rate. Why should Kerala be punished for its impressive performance by receiving less revenue from the Finance Commission, and also losing seats in Parliament, thereby being forced to dilute its voice in national affairs?
The government’s answer would be that those are the rules of democracy: one-person-one-vote means the more people you have, the more political clout, and tax rupees, you get. But in a country like India, whose diversity is held together by a sense of common belonging but whose civic nationalism must accommodate a range of states with divergent levels of development, it is essential that all feel that their common nationhood is a winning proposition for them. In a country where regional, religious, and linguistic tensions are never far from the surface, such an answer — “we have more people, so we will have more money and more power” — risks rupturing the fragile bonds that hold us all together.
As it is, the Hindi-Hindutva-Hindustan politics of today’s BJP is very different from the conciliatory coalition-building of the Vajpayee era when the BJP was last in power. Their blatant majoritarian triumphalism, the brazenness of the Hindi supremacism that infuses their discourse, and the culture of Aryavrat domination that infects their attitudes, have already raised disquiet among many southern politicians. Allied to this is an insensitive and inept management of crucial federal issues, of which the botched allocation to states of funds from the State Disaster Risk Management Fund (SDRMF) for relief measures during the coronavirus lockdown — of amounts which bore no relation to the size of the COVID-19 caseload, the number of migrants in the state or any similar challenges — was alarmingly illustrative. The over-reliance of the Union government on fuel cess to collect revenue, reduces the share of states from the divisible revenue pool (since cess is not shared). The combination of ineptitude and bigotry has laid the country low; if the Modi government compounds its economic fecklessness with political recklessness, it could plunge India into turmoil.
We have already seen how much the south is aggrieved by the ruling party’s aggressive promotion of linguistic nationalism. The three-language formula is honoured in the breach by Hindi-speaking states that are complacently soaking up the benefits of their mother tongue’s increasing dominance while disregarding their obligation to teach and learn a southern language; meanwhile, southern civil servants are suffering the burden of the government’s increasing linguistic homogenization, while English is daily disparaged with scant regard for the utility to India of its officialdom mastering a world language. The financial and political consequences of this attitude threaten the very unity of India, since the south would face political disenfranchisement to go along with its sense of financial victimisation — a combination that is bound to generate resentments that can spill over beyond the confines of quotidian politics.
The only remedy is to acknowledge that we need a more decentralised democracy, one in which the central share of tax resources is not so crucial, and the political authority of New Delhi not so overwhelming. That could make the concerns raised by the new census figures less relevant. But as long as our system is what it is, we need to run it sensitively. That is something that the Modi government has failed to do. Such concerns should ignite deep disquiet among all well-wishers of Indian democracy, and all inclusive-minded Indian nationalists.
This story first appeared on thenewsminute.com