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The Hindu
The Hindu
The Hindu Bureau

Balagopal blames Central policies for financial crunch in State

Kerala Finance Minister K. N. Balagopal on Friday slammed the financial policies of the Union Government for depriving states including Kerala their rightful share and straining Centre-State relations.

Mr. Balagopal was inaugurating a panel discussion on the ‘state of state finances’, jointly organised by the Kerala Economic Association (KEA) and Gulati Institute of Finance and Taxation (GIFT), ahead of the 2024-25 budget.

States like Kerala face a tough situation with their taxation powers trimmed and development getting “minus marks,” he said. “It’s like being asked to swim with your hands and legs tied,” he said.

Mr. Balagopal reiterated Kerala’s long-standing complaint that the conditions set for centrally-sponsored schemes are neither flexible nor state-specific. States should have a lot more freedom in deciding how these schemes are implemented, he said.

Citing 15th Finance Commission estimates, Mr. Balagopal observed that while 62.7% of the country’s gross revenue flows to the Union government, 62.4% of the total expenditure is met by the States. “There is no logic in this. And this is not a problem faced by a single State, but by all of them. When States are denied their rightful share, it leads to rifts and absence of trust in centre-state relations,” he said.

If Kerala had not succeeded in enhancing its revenue collection from ₹ 48,000 crore to ₹ 71,000 crore in the last two years, it would have faced a really difficult time financially, given the huge dip in central transfers, the Minister said.

Senior economist M. A. Oommen, who presided, said there is a need to revisit Article 246 and the Seventh Schedule of the Constitution “for a fresh division of powers, authority and responsibilities.” He also said that the need for financial prudence by each State is “loud and clear.” “It is a matter for further examination how far the states can go towards efficient mobilisation with several tax handles being taken over by the Centre,” he said.

KEA president K. N. Harilal moderated the session. Former Finance Minister T. M. Thomas Isaac, GIFT director K. J. Joseph, K. P. Kannan, honorary fellow, Centre for Development Studies (CDS), Fifth State Finance Commission chairman B. A. Prakash, presented papers.

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