Telangana Chief Secretary Advocates for Predictable Fiscal Framework
In a significant address, Telangana chief secretary K Ramakrishna Rao has called upon the Central government to adopt a formula-based system for grant allocations to states. Speaking at a conference on the 16th Finance Commission organized by the Centre for Economic and Social Studies (CESS) in Hyderabad, Rao emphasized the need for a more predictable and equitable fiscal framework. He warned that discretionary funding mechanisms could disproportionately disadvantage revenue-deficit regions and undermine the effectiveness of local governance.
Transparent Criteria Essential for Fair Resource Distribution
Rao stressed that transparent criteria are crucial to ensure a fair distribution of resources, particularly for states grappling with structural fiscal gaps. He highlighted the importance of grants that are tailored not only to revenue-deficit states but also to state-specific and sector-specific needs. While welcoming certain recommendations of the Finance Commission, Rao expressed reservations about linking funds for local bodies to performance metrics and mandatory state contributions, deeming such conditions unnecessary.
He pointed out that current allocations to local bodies lack a clear formula, arguing that predictable funding could instead be ensured through a fixed, transparent mechanism. "But asking for state share is also not needed in case of local bodies," he stated. Rao noted that although the Centre has broadly accepted the commission's recommendations on tax devolution, it plans to further examine those related to grants. "Our discussions in the conference will provide us with the opportunity to express our concerns about the absence of a formula for the allocation of grants to local bodies," he added.
Former RBI Governor Highlights Resilient Federal Structure
In his inaugural address at the same conference, former RBI governor Duvvuri Subba Rao described India's federal structure as remarkably resilient compared to other federations facing separatist or ethnic tensions. He outlined three key aspects of this resilience:
- First, India's model as a 'union of states' effectively blends centralised authority with decentralised governance, enabling efficient management of a vast and diverse population.
- Second, he emphasized that state finances are central to national economic management, with states accounting for approximately 60% of public expenditure and a substantial share of borrowing.
- Third, Subba Rao highlighted the growing divide between the central government and the states, manifested in limited spending freedom, borrowing limits, and reduced ability to raise resources. He asserted that this issue requires urgent attention to sustain economic growth and maintain the integrity of the federal system.
The conference served as a platform for robust discussions on fiscal policies, with stakeholders advocating for reforms to strengthen India's federal framework and ensure equitable development across all regions.
