New Delhi, India – Startling revelations have emerged regarding the Indian government’s efforts to reduce funds allocated to the country’s states through backdoor negotiations with the Finance Commission. These revelations, disclosed by BVR Subrahmanyam, CEO of government think-tank NITI Aayog, shed light on the Modi government’s attempts to limit state finances and the subsequent impact on welfare programs.
According to Subrahmanyam, immediately after assuming office in 2014, Prime Minister Narendra Modi engaged in secret negotiations with the Finance Commission to reduce the amount of tax revenue allocated to states. However, the head of the commission, YV Reddy, resisted these efforts, leading to a revision of the government’s budget and cuts to welfare programs.
The revelations highlight the government’s behind-the-scenes maneuvering and financial haggling in the making of the federal budget. Subrahmanyam’s comments also shed light on the lack of transparency in the government’s fiscal condition, similar to the recent Adani Group accounting scandal.
Subrahmanyam’s claims have been independently verified by The Reporters’ Collective, who have analyzed budget documents from the past decade. The attempt to reduce states’ share of revenues ultimately failed, and the government was forced to accept the Finance Commission’s recommendations.
However, despite the government’s failure to reduce state finances, Prime Minister Modi falsely claimed in Parliament that he welcomed the Finance Commission’s recommendations. This discrepancy between public statements and behind-the-scenes actions raises concerns about the government’s transparency.
The Modi government’s budget revision resulted in significant cuts to welfare programs and allocations for education. Subrahmanyam revealed that the budget was hastily rewritten in just 48 hours, leading to a halving of funds for the Ministry of Women and Child Development.
Furthermore, Subrahmanyam expressed concerns about the government’s accounting practices and the use of off-budget borrowings to meet expenses. He emphasized the need for greater fiscal transparency and criticized the government’s disclosure of off-budget borrowings as insufficient.
The Modi government’s use of cesses and surcharges to raise revenues has also been criticized, as states are not entitled to a portion of these taxes. The share of cesses and surcharges in total taxes collected by the government has increased since 2015, leading to concerns about states’ autonomy in taxation.
Additionally, the introduction of the national goods and services tax (GST) has further restricted states’ financial independence, resulting in a decline in state tax revenues. Researchers have found that state revenues have decreased post-GST implementation compared to the pre-GST period.
The Modi government’s attempts to curtail states’ financial independence have been evident in the establishment of the 15th Finance Commission, which aimed to incentivize states to avoid “populist measures.” However, Subrahmanyam disagreed with this approach, asserting that such decisions are societal and political, rather than purely economic.
These revelations highlight the need for greater transparency and accountability in India’s fiscal management. The government’s attempts to limit state finances and the subsequent impact on welfare programs raise concerns about the prioritization of central power over states’ autonomy.
