The terms of reference of the new 15th finance commission have stirred a hornet’s nest, with states in South India expressing their dissent over it. Southern states are already paying more than what they receive from the central exchequer, and using the latest population figures to determine the size of fiscal transfers to states will benefit North India at the expense of the South, the argument goes.
The first big hole is that unlike what has been portrayed, this isn’t exactly a “North India vs South India” issue. Rather, it is more of a poor-vs-rich issue. As the chart below shows, southern states are not the only ones which disproportionately contribute more to centre’s funds. Western states such as Maharashtra and Gujarat and northern states such as Punjab and Haryana also contribute more than what they receive from Centre.
Quite a few northern states contribute more than what they receive from the Centre
Money received from Centre for every Rs. 100 contributed to Centre's tax revenue* (FY17)
13
100
200
219
Bihar
189
Assam
149
Uttar Pradesh
142
Odisha
139
Madhya Pradesh
134
Chhattisgarh
132
Jharkhand
116
Uttarakhand
110
Rajasthan
70
Telangana
68
Andhra Pradesh
52
Kerala
42
Punjab
36
Karnataka
29
Tamil Nadu
25
Haryana
20
Gujarat
13
Maharashtra
*before the Centre redistributes a part of it among states.
State's contribution to Central taxes has been estimated using (1)
zone-wise break-up for excise and customs (provided in MOSPI statistical
year book), (2) state-wise direct tax break-up as provided by CBDT and
(3) state-wise GSDP for corporate tax break-up (to adjust for
headquarter effect)
Data suggests that Maharashtra, Gujarat, Haryana and Tamil Nadu received
less than Rs30 from the Centre—in the form of taxes devolved and other
transfers—for every Rs100 they contributed to the Central exchequer in
2016-17. In contrast, states such as Bihar and Uttar Pradesh received
around 200% and 150%, respectively of what they contributed.
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