Telangana Finance Minister T. Harish Rao has said that the current slowdown has made it imperative for the Centre to empower States in terms of both financial resources and autonomy as the States are drivers of economic activity.
He spoke at the pre-budget meeting convened by Union Finance Minister Nirmala Sitaraman with Finance Ministers of States in New Delhi on Wednesday and made several suggestions for kick starting the growth momentum.
Tax amnesty
One of the suggestions was -- ‘tax amnesty’ to flush out evaded income with a low rate of tax and to park the declared money for 10 years in National Investment Fund to assist the States. After that the money could be given back to the person in a phased manner, he said.
“One of the main mandates of NITI Aayog is to foster cooperative federalism and the one-size-fits all approach inherent in Central planning will not work in favour of all States. There is no action in this direction even after five years to build ‘Team India’ by recognising that strong States would make a strong nation,” he said.
He requested the Union Finance Minister to implement the recommendations of the Sub-Group of Chief Ministers on rationalisation of Centrally-sponsored schemes in Budget 2020-21. The sub-group’s recommendations in 2016 said the focus of CSS should be only on those schemes that comprise the National Development Agenda and that the list of CSS should be pruned. The sub-group recommended that the funds for optional schemes should be allocated to the States as a lump sum and States would be free to choose which optional schemes they wish to implement. The Centre should prune its expenditure on State and concurrent subjects and transfer it to the States to enable them spend more on infrastructure and revive demand, he said.
Yet contrary to the recommendations, the Centre had grouped the CSS under 28 umbrellas with the components remaining the same and increased the matching contribution of States. He suggested that MGNREGA be linked with agriculture sector for better synergies.
GST implementation
Mr. Harish Rao wanted the concerns of States with regard to implementation of GST - related to accounting, compensating States and sharing of Integrated Goods and Services (IGST) with States - be addressed urgently to restore the trust reposed by the States in the Union. The GST has subsumed 31% of the gross tax revenue of the Centre and 47% of own tax revenue of States. As a result, the States have lost more flexibility. The Centre had distributed only ₹67,998 crore to States under IGST -- out of balance of ₹1,76,688 crore -- while it should have distributed 50% to the States, he said.
