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Are Southern States Bearing the Price of Their Success?



  Oct 23, 2023

Are Southern States Paying for Their Success?



Introduction:

India's diverse landscape encompasses various states with their unique socio-economic backgrounds. Recently, a series of concerns has emerged from leaders representing Southern Indian states.
They argue that these states are being subjected to a "step-motherly attitude" by the Union government, particularly in terms of the devolution of funds and forthcoming constituency delimitation.
In this essay, we will delve into the factors behind the perception that "Southern states are being punished for their success" and explore potential solutions to address these concerns.

Factors Behind the Punishment Perception:

Finance Commission's Role: The Finance Commission plays a pivotal role in determining how central funds are allocated among states. This allocation is based on specific criteria, including a state's share in the total population and the income distance ratio, which measures how a state's per capita income compares to the national average.
The issue arises as both these criteria seem to work against the Southern states. Over time, there has been a significant decline in the share of resources allocated to the South.
For instance, Kerala's share decreased from 3.8% during the 10th Finance Commission to a mere 1.9% recently.

Equity and Redistribution: While inter-State transfers are necessary for equity in a federal system, there is a growing concern that the higher resource transfers to less developed states have not produced the expected improvements in their economies or social welfare. This raises questions about the effectiveness of these policies.

Population Weightage Reduction: Recently, there was a shift in the population base year used for resource distribution. Although some reduction in population weightage was achieved through a compromise,
the Southern states, which have seen a decline in population growth, argue that the reduction still negatively impacts them. There is a close correlation between population decline and economic growth, which exacerbates the situation.

Unequal Development Policies: Issues are raised regarding the effectiveness of development policies pursued by various states. Despite relaxed borrowing limits during the COVID-19 pandemic,
states, including those in the South, have been hesitant to spend on essential areas like education and healthcare. Unspent funds, which are significant, remain unused, and this disproportionately affects poorer states.

Delimitation Freeze Concerns: The impending constituency delimitation by 2026 poses additional challenges. While the Southern states have adhered to population norms and national policies,
the delimitation could lead to a decline in their representation in the Parliament. This raises concerns about penalizing states for their success in implementing national policies.

Suggested Solutions:

Balancing Representation: To address the imbalance, it is crucial to balance redistributive transfers with contributions. Calls for freezing Rajya Sabha seats to ensure effective representation and involving states in financial decision-making should be considered.

Reconsidering Population Criteria: Advocating for the use of the 1971 population as a basis for allocation and exploring alternative formulas that recognize states' success in implementing national policies.

Conclusion:

The perception that Southern states are being penalized for their success is a complex issue involving multiple factors, from finance commission criteria to development policies and delimitation concerns.
To build a more equitable India, it is imperative to find solutions that ensure effective representation for all states while recognizing the unique challenges and achievements of each region. Balancing the scales of equity and development in a federal system is a complex but essential task for fostering a united and prosperous India.


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