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The State Government is of the view that the Raghuram Rajan Committee report for evolving a composite development index of States is against the concepts of fiscal federalism.
Chief Minister Oommen Chandy will convey the State’s objections when he meets Prime Minister Manmohan Singh in New Delhi on Friday.
GENERAL METHOD
The Committee has proposed a general method for allocating funds to States based on both their development needs and as well as its development performance.
Each State may get a fixed basic allocation of 0.3 per cent of overall funds, to which will be added its share stemming from need and performance to get its overall share.
Kerala, along with Tamil Nadu and Goa, have been put in the ‘relatively developed category’ of the so-called underdevelopment/need index.
This would put these States under great disadvantage in terms of future allocations in what is being perceived as wrongful reprimand for pursuing all-round development.
FUND DEVOLUTION
Given this, Kerala does not want the Centre to consider any of the committee recommendations for implementation since it is violates scheme of devolution of funds by the Planning Commission.
It is planning to submit detailed comments after exhaustive examination of the report, sources in the Government said.
The Committee has mentioned that its recommendations might be used to allocate some of the developmental funds even while stating that existing methodologies need not be changed.
But, there is no uncommitted corpus of funds with the Centre that can be allocated as recommended by it. For devolution of Plan funds, there are established methods.
The State Government feels that the methodology adopted by the committee is seriously flawed as it does not include major economic factors in shaping the index.
SERIOUSLY FLAWED
These included agriculture production, production of manufactured goods or power generation. This would aggravate existing imbalances.
Kerala agreed with the dissent view expressed by committee member Shaibal Gupta that the choice of monthly per capita consumption expenditure in place of per capita gross State domestic product is out of place.
Per capita consumption does not reflect production and income derived from production. Given inflow of foreign and domestic remittances in the State, this would give a distorted picture of development.
Also, per capita consumption expenditure does not take into account the difference in prevailing level of inflation in different States. Here, price differentials could be as high as 30 to 40 per cent.
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