JOIN USSeventy years after India became an independent democracy and chose to be a union of states, we appear to be still struggling with the architecture of federalism. An instance of this has arisen with respect to the allocation of central tax revenues among the states. After four decades of having followed a certain formula, the Centre has announced a change that has caused disquiet among the southern states. The chief ministers of these states have agreed to meet on April 10 to present a common front to the Centre.
The central tax revenues are devolved to the states according to their populations. Naturally, therefore, UP would get a larger share of the pie than, say, Tamil Nadu. Population is not the only criterion, of course. There are others, such as special needs arising from the geography of a state. Over and above, 'special assistance' is at times made available on the basis of considerations such as backwardness or new formation. It is a remarkable tribute to Indian democracy that all this had been thought out so clearly early in the days of the republic and, more importantly, widely accepted in so diverse a country. So, what has caused southern discomfort now?
Allocations of the central revenue are made by the Finance Commission, a body that has constitutional status. The 15th Finance Commission has now been constituted by the Centre. It is its terms of reference, given by the central government, that has left the leadership of the southern states unhappy. In a unilateral step with significant implications, the terms of reference require that allocations be made according to the population of states as per Census 2011. This revises the rule followed so far, whereby the calculation was based on the population distribution in 1971.
The southern political leadership's opposition to the new formula is based on the fact that since 1971, population growth has diverged considerably between their states and the states of the Hindi heartland. While it has slowed very considerably in Kerala and Tamil Nadu, it has slowed all over the south, unlike in the states of the north, particularly UP.
If now the headcount of 2011 is used, the northern states will receive a higher proportion of the tax revenues than they have so far, purely on grounds that their population has grown faster. This would be unjust. It is also bad economics because it incentivises higher population growth. Freezing the population count on what it was in 1971 would serve to penalise states that do not bring about a demographic transition fast enough. On the other hand, the move to use the population figures of 2011 to allocate funds would be a case of rewarding a laxity in this sphere. It is interesting that elsewhere, the central government does not shy away from enforcing its own vision of 'good governance' in other spheres.
Apart from considerations of public finance and policy, there is a high-handedness to the advisory given to the 15th Finance Commission by the central government. Decisions on matters such as rules for dividing the nation's fund cannot credibly be anything other than bipartisan. In this case, the opposition has not been taken into confidence. A perception of fairness is central to ownership of political arrangements and southern disaffection is likely to grow if the present issue is not resolved amicably.
The fiscal disruption caused by the Modi government is, however, a mere irritant compared to the time-bomb ticking away in the form of impending changes to parliament. A delimitation of constituencies is expected after 2026. There is likely to be an increase in the number of seats in the Lok Sabha after the lifting of the 40-year freeze imposed by the 42nd Amendment. Right now, there is no clarity on how an increase in the number of seats will be allocated among the states. If this will be determined according to the population then current, or even the 2011 census data, again, given the higher growth of population in northern India, it would leave the southern states with relatively lower representation in India's parliament.
This is a far more serious issue than dissatisfaction over allocation of central tax revenues. Are the southern peoples prepared to happily accede to an arrangement whereby they would have even less of a say in running this country than they do now? Unlikely. The defining reality is that the southern part of the country has witnessed far greater social transformation than the north. An indication of this was the relative calm experienced south of the Vindhyas on April 2, when Dalit organisations had called for a Bharat Bandh. The reason for this is that the kind of upper caste oppression seen in the north has long ceased to exist in the south due to the spread of a democratic consciousness. The average southerner sees the khap panchayats, the worsening sex-ratio and animus towards muslims in contemporary north India as a metaphor for its society. She is wary of a further strengthening of its hold over her country. After all, the south has had to wage a struggle to safeguard its identity once already when in the mid-sixties it saw-off the attempted imposition of Hindi. Half a century later, the BJP, essentially a north Indian party, rules much of India. It would require a more enlightened northern leadership than there is to be found today to assure the south of a democratic future within the union of states that is India.
(The writer is Professor, Ashoka University, Sonipat, and Senior Fellow, IIM-Kozhikode)