Addressing what he termed an “unfair” devolution of taxes by the central government, Karnataka Chief Minister Siddaramaiah has initiated a dialogue with his counterparts from eight other states.
The Conclave’s purpose
CM Siddaramaiah has invited Chief Ministers from Kerala, Tamil Nadu, Andhra Pradesh, Telangana, Maharashtra, Gujarat, Haryana, and Punjab to discuss the implications of the current tax devolution model.
The meeting is set to deliberate on how the Finance Commission’s approach needs a “directional shift” to foster growth and better tax mobilization, emphasizing that states contributing significantly to the national GDP and tax revenues are not receiving proportional benefits.
Arguments presented by CM Siddaramaiah
Unfair Devolution
CM Siddaramaiah argues that states like Karnataka, which boast higher GSDP per capita, are penalized through lower shares in central fiscal transfers. He claims this undermines cooperative federalism and threatens the financial autonomy of progressive states.
Need for Balance
The Karnataka Chief Minister has said there’s an urgent call to balance equity with efficiency and performance. Mr. Siddharamaiah’s contention is that while equity is crucial, it should not come at the expense of states that perform well economically.
Impact on Infrastructure
The reduction in central financial transfers, as per CM Siddaramaiah, severely limits the ability of well-performing states to invest in both physical and human infrastructure, thereby stunting potential growth.
Political Implications
The latest move by Mr. Siddaramaiah not only reflects Karnataka’s economic grievances but also taps into a broader sentiment among non-BJP-ruled states. The timing, coinciding with the deliberations of the 16th Finance Commission, suggests an attempt to influence the commission’s recommendations towards a model that better reflects states’ contributions to the national exchequer.