DMK’s views on devolution of funds is guided by the principles of equity, efficiency and transparency. “It stays the same in Opposition or as the Government, because our constant principles drive our views,’ said Tamil Nadu Finance Minister PTR Palanivel Thiaga Rajan .

In a tweet, he also shared excerpts from a statement made on behalf of the party to 15th Finance Commission in 2018.

“For now, I leave you with some excerpts from my statement on behalf of the DMK to the 15th Finance Commission in 2018. Our views stay the same in Opposition or as the Government, because our constant principles drive our views,” he said in the tweet.

The party in 2018 asked the Commission to be guided by the principle of equity, efficiency and transparency. The principle of transparency is both easily defined and easily justified. However, when it comes to equity and efficiency, there can be many differing ways of defining each of these principles, with varying levels of support across different sections of the society. For example, should efficiency be defined at a micro-level (eg success in implementing individual programs), or a macro-level (eg increasing per-capita productivity for a state)?

Similarly, should equity require revenue sharing roughly proportional to needs irrespective of contribution, or considering both needs & contribution? More importantly, a clear definition of the principle of equity is one of the key characteristics of any democracy. Should that not be the prerogative of elected governments rather than of an appointed commission? Therefore, we suggest that the framing of these principles be reconsidered, and either reframed or at least stated with greater detail and lucidity, to ensure they are understood well by all. We will return to this point in our later comments.

Sharing a table of the 14th Finance Commission Allocations per million on 2011 population, the party told the 15the Finance Commission that Tamil Nadu receives among the lowest allocations per-capita from the Central Tax Revenue Pool. “We understand that there are many considerations that go into the final allocation, and that in any democratic country bound to the principle of federalism, there must be net transfers from state to state in the interest of inclusive development. We expect that and support the principle and the practice whole-heartedly,” the party said.

“However, we must also consider the evolution of such transfers in a historical context. The table below shows the history of allocations to Tamil Nadu across successive Finance Commissions, in conjunction with rough estimates of Tamil Nadu’s GSDP as a proportion of India’s GDP over the past 25 years. It is clear that there is a unidirectional downwards trajectory in allocation, cutting our share down by roughly 40 per cent in proportional terms. During this same period, Tamil Nadu’s proportional share of GDP – a rough proxy for contributions to the Central Tax Revenue pool, in the absence of statistics published by the Government of India – has gone both down and up. But taken over the entire 20-year period, the contribution is up about 13 per cent proportionally,” the statement said.

The proportion of revenue allocated to Tamil Nadu, and similar states, has decreased significantly. Mathematically, this must be accompanied by a corresponding (and continuous) increase in allocation in other states.

Using proportion of GDP as a proxy for progress, it doesn’t appear that such redistribution has resulted in any narrowing of the economic growth rates or output across states (using Tamil Nadu as an instant example)

If these trends were to continue or worse, accelerate, we are likely to encounter two structural issues - Increasing disparity between development across the States of the Union, despite ever-increasing transfer between states through the Centre’s collection and allocation of taxes & grants-in-aid and increasing disparity between contributions to the Centre’s tax revenue pool across states, and the corresponding allocations back to such states from the Centre (continuously increasing tax contributions with continuously reducing allocations in return), the party’s statement said.

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