Double engine should be colour blind for Viksit Bharath: RBI ex Guv Subba Rao 

Unpublished story of the former governor who gave a lecture at the CESS in Hyderabad.

DC Correspondent

Hyderabad, Jan. 30: Former Reserve Bank Governor D. Subba Rao said the states and centre which are on a confrontation mode now should be more conciliatory and consultative for a viksit bharat by 2047. He averred that double engine growth should be colour blind and work even if the engines are of different colours.

Addressing a seminar on ‘India’s Fiscal Federalism – Quo Vadis?’ at the BPR Vithal Memorial Lecture in the Centre for Economic and Social Studies on Thursday he said, “The nation has passed through three phases of federalism from the time of Nehru when we had docile federalism as he was treated more as a national figure and most states were ruled by the Congress party. The second phase between the 1970s and mid 1990s we had cooperative federalism when leaders like Jayalalithaa, Ramakrishna Hegde were CMs who built their careers with a confrontation attitude against the centre.”

 

But BPR Vittal who headed the 10^th finance commission (1993-98) knew how to balance the demands of the centre and states as he had a nationalist view though he knew the state's condition, he said.

 

He further explained that the mid 1990s heralded the phase of combative federalism when states began to accuse the centre of not giving their share. The day when Deve Gowda became PM with the support of regional parties they began to seek their pound of flesh. But the state share of taxes are consistent by the principle of subsidiarity where more buoyant taxes like customs, central excise, personal income tax and corporate tax go to centre and tax on land, agriculture, sales, property which are less buoyant go to states. The expenditure which affects everyday lives of common man is incurred by states.

 

So to solve this confrontation the constitution has the finance commission formed every five years to decide on this centre state share.

 

Delving on if fiscal federalism is loaded against states he stated every political entity wants devolution to stop at their level. He opined that the centre by funding the local bodies had taken on additional burden on itself, launched centrally sponsored schemes (CCS) to drive towards its stated national priorities like fighting malaria, giving mid day meal and employment by NREGS. The GST is a win-win for both centre and state as both have given up their sovereignty on who decides the taxes. The limits on borrowing contrary to perception is a constitutional provision as per article 293 not imposition by a party or PM.

 

On the flipside he said, “The centre needs to be more conciliatory and consultative as the needs of Kerala and Manipur are not the same. A CCS funding for training bamboo weavers exists but cannot be used by many states as they don’t have them. Centre has an incentive for imposing surcharges and cesses which don’t have to be given to the states. The first generation reforms were possible as they were in the central domain but second generation reforms on land, labour, foreign investment in single brand retail etc need the nod of states to attain viksit bharat by 2047.”

 

The goals and roadmap to the viksit bharat are not clear to any one, he said adding to a query that migration of people from states is a way to bridge economic differences and cross subsidization is part of being a federation.

 

Weighing his take on the issue, K. Ramakrishna Rao, state special finance chief secretary said, “The share of resources given by the centre in 2014-15 were 25 percent which have fallen to 15 percent in 2024. The states have taken this issue to the Supreme Court. In China 53 percent of the funds are spent by the local bodies while we spend only three percent. The increase in per capita income in Telangana by three times from 2014 is working against the state in getting more funds as that is also a metric for getting funds from the centre.” (G Ram Mohan)