Shashi Tharoor,KT Rama Rao,PTR ThiagaRajan, Buggana Rajendranath Reddy . Photo: PTI
Last weekend in Hyderabad an interesting and unusual conclave convened. The “Dakshin Dialogues” convened by South First, a new organisation dedicated to raising awareness about the issues confronting the Southern states, held a series of discussions on various aspects of our increasingly dysfunctional federalism. I found myself on a panel with three Ministers, all from regional parties – KT Rama Rao, the bright young scion of Telangana Chief Minister KCR, who serves as Minister for IT, Industries & Commerce and Municipal Administration & Urban Development; “PTR” ThiagaRajan, Tamil Nadu’s Finance Minister; and his Andhra counterpart, Buggana Rajendranath Reddy. In the audience (having already spoken) was Kerala’s former Finance Minister Thomas Isaac. It was clear to all of them that as the South outperforms the North, problems have arisen that must be faced in the interests of India as a whole.
The ruling BJP’s hyper-nationalist desire for uniformity too often rides roughshod over the federalism that keeps our diverse country united. The government’s decision in 2017 to change the terms of reference of the Fifteenth Finance Commission to base allocations on the 2011 census, rather than the 1971 census, had already prised open a North–South divide, opening a Pandora’s Box with incalculable consequences for the country. The Finance Commission’s revised allocations have sent even more tax money from the South to the North than previously. As the south Indian data analyst, Nilakantan R. S., author of a new book called “North vs South,” wrote, “India rewards the brute demographic advantage of north India over a state’s performance.”
Nilakantan wrote that the Fifteenth Finance Commission was ‘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.”
The reason, of course, is that previous Finance Commissions had based themselves on population figures from the 1971 census. That may seem odd, since we have had four censuses since 1971, and new numbers have been available to successive Finance Commissions. But the reason for this is very simple, and it was made explicit in relation to an even more vital issue—that of political representation in our Parliament. In 1976, the omnibus 42nd Amendment to the Constitution decided to freeze the allocation of Lok Sabha seats to our states for twenty-five years to encourage population control, by assuring states that success in limiting population would not lose them Lok Sabha seats. In 2001, the NDA Government of Prime Minister Vajpayee extended this arrangement for another twenty-five years; its proposal, which became the 91st Amendment, was unanimously adopted by all parties in both Houses of Parliament.
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 in 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. 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, whereas for every one rupee of tax contributed by Karnataka, the state receives 0.47. All Southern states recognize the need to correct regional imbalances, and for richer States to subsidize poorer ones. But it is fair to ask, as former Karnataka CM Siddaramaiah once did: “where is the reward for development?” He added that if population was an important criterion for the apportionment of central taxes, “for how long can we keep incentivizing population growth?”
The iniquities are measurable. To take just one example, Karnataka meets 72% of its expenses from the state’s own taxes, whereas Bihar covers just 23%, getting 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 in the current dispensation, that makes them eligible for a larger share of tax revenues.
The issues involved in the Dakshin Dialogues are important enough that I will return to the theme in my next column.