“Fund transfer to states up almost four times”

NEW DELHI: The government white paper presented in Parliament on Thursday said that the transfer of money to the states was roughly four times larger, in line with the spirit of cooperative federalism, in the face of protests from opposition-led states over the claimed negligence in sharing resources by the Center.

“Our government, in the genuine spirit of cooperative federalism, embraced the proposals of the 14th and 15th Finance Commissions, acknowledging that states are equal partners in development. Over the last ten years, the states have received an annual allocation of between 41-42% of central taxes. This is a significant increase above the previous devolution share of 30–32%. As a result, states have received almost 3.8 times more resources than they had in the past. According to the white paper, this increase in the total amount of resources given to states corresponds to almost 1% of GDP.
The finance commission, which is appointed every five years, develops the formula, which is based on a number of factors, for the macro-level distribution of central tax income to each state.
The Center has supported the states in meeting their development and welfare needs through a number of other measures, including the GST compensation cess, permission to allow higher borrowings after COVID-19 (some linked to reforms), and long-term interest-free loans for capital expenditure.
It mentioned how the states and the central government collaborated, citing the implementation of the GST as one of the main achievements of the Modi administration.
“Building political agreement and the GST Council’s pooling sovereignty, two key elements of cooperative federalism, define the new tax framework… Gains have resulted from the GST reform on many fronts. As a result of merging India’s states into a single market, the new tax structure is also encouraging firms to grow,” said the paper that the finance ministry spent the previous month or so preparing.
It brought up the fact that the Centre had pledged to cover any “shortfall” in the event that any state’s growth in GST collection was less than 14%.