We are more federal than UPA, says NDA government's White Paper

The Ministry of Finance said on Thursday that 41-42 per cent of central taxes have been shared with the states every year over the past decade ruled by the National Democratic Alliance (NDA), compared to 30-32 per cent during the regime of the United Progressive Alliance (UPA).

“Acknowledging that states are equal partners in development, our government, in the true spirit of cooperative federalism, accepted the recommendations of the 14th and 15th Finance Commission,” said the government in a white paper on the Indian Economy tabled in Parliament on Friday.

Consequently, the NDA rule has transferred Rs 84.3 trillion of central taxes and Finance Commission grants in a decade, which is 3.8 times higher than Rs 22.1 trillion during a decade of rule by UPA.

 

The transfer of these resources to states constituted 3.36 per cent of gross domestic product (GDP) during UPA rule against 4.24 per cent during NDA rule so far.

“This leap in the absolute quantum of resources devolved to states translates into about 1 per cent of GDP,” the white paper said.

The devolution of central taxes and grants to states, referenced above, is based on the recommendations of the Finance Commissions.

The 11th Finance Commission recommended that the share of states in central taxes be 29.5 per cent from 1999-2000 to 2004-05. The next Finance Commission pegged it at 30.5 per cent from 2005-06 to 2009-10, and the 13th Finance Commission suggested it at 32 per cent during 2010-11 to 2014-15.

It was the 14th Finance Commission, headed by Y V Reddy, that recommended a jump in this transfer to 42 per cent from 2015-16 to 2019-20.

The 15th Finance Commission maintained the recommendation, but the total tax devolution was reduced to 41 per cent in its two reports for 2020-21 and 2021-22 to 2025-26 since Jammu & Kashmir and Ladakh were carved out into Union Territories.

The respective governments accepted this part of the recommendation of the respective finance commissions. However, successive governments increasingly resorted to cesses and surcharges to bypass the recommendation.

The paper said the Centre has stood firm by the states in times of a changing environment.

Acknowledging the need for timely funds in states, we have front-loaded these payments to states, the ministry said.

The goods and services tax compensation cess, additional borrowings, and very long-term interest-free loans for capital expenditure have expanded the resources of states for spending in line with their development and welfare needs, it said.

The assertion of the finance ministry about boosting the financial resources of states came when southern states were protesting against alleged discrimination meted out to them in the transfer of resources.