Schemes which may look like populist may in fact be popular as well and the scheme which may have commenced as a populist scheme has over a period of time may have generated multiplier effect said N. K. Singh, the Chairman of the visiting Finance Commission at a press conference in Chennai today. On what constitutes populist or not, commission is hearing different viewpoints, it will need to consider this in totality taking everything into account, he added.

North versus South debate is misleading, he mentioned, as many states from other parts of the country are also expressing similar apprehensions as made by southern states like the issue of population date of 2011 etc. It will be the endeavour of commission not to penalise the states doing well on demographic front as well as economic front while carefully balancing the equity and efficiency.

Acknowledging that there are issues with GST like rates and the compensation which may take some time to settle, he said that Commission will try to make realistic GST projections for states considering that 14% compensation will not be there for states in the last three years of award period of this commission. It will also be a challenge to make revenue projections from GST for centre. Finance Commission is doing consultation with CBIC on GST.

Challenge arising out of urbanisation and resultant migration is a significant issue for tamilnadu which needs serious consideration as the urban centres are the growth engines for not only TN but for the country as well. With achieving Total fertility rates less than replacement rate of population growth, rising percentage of ageing population will create new pressure on state finances and need specific care by the state.

Appreciating the growth momentum of the state, Chairman said that Tamil Nadu has made an outstanding contribution in the momentum for India’s economic development with per capita income significantly higher than national average and poverty significantly below, noted the Chairman. There have been excellent record of fiscal management and debt management well within the limits, however, inter district disparities are a worrisome feature and need priority attention.

Tamil Nadu has been traditionally welcoming the private and foreign investment which makes TN an imp engine of Indian growth. Commission also noted the policy imperatives by the state govt for enhancing Ease of Doing Business which has also helped in creating jobs.

Other issues which were discussed during meeting to take growth momentum of TN further while reducing disparities

1.        Floods management system

2.        Improving productivity of agriculture

3.        Imp flood erosion works and paucity of resources for management of water resources

Commission has taken serious note of all the submissions made in the memorandum submitted and discussed and assured TN govt that to ensure that gains that tn has achieved is further strengthened so that tn continues to play the imp role which it has played as an imp engine in india’s economic growth and creating a catalytic effect by attaracting foreign investment.

The Commission noted all the suggestions made by the State Govt. with respect to higher vertical devolution and different weightage for horizontal devolution. In particular, the way calibration is done for the geographical areas, forest areas, environment and high density of tribal population. Commission recognised that it requires sympathetic treatment by the Finance Commission and to come up with solutions in terms of combining the virtues of rewarding efficiency and equity along with consideration to special needs of states like Jharkhand.

Chief Minister urges the Commission for a flexible Debt/GSDP norm

   Chief Minister Shri E. Palanisamy in his welcome remarks highlighted the growth momentum in the State. He reminded the Commission about the declining share of the state in the devolution share since 10^th Finance Commission. He urged the Commission to reverse this trend so that development efforts of the state do not stifle.

State govt officials in their presentation gave some innovative suggestions on vertical and horizontal devolutions. They demanded to include the population control and contribution to central taxes as criteria. They also suggested using ‘Environmental Performance Index’ which is a more holistic approach. They made some state specific suggestions related to Conservation of heritage buildings and Maintenance and strengthening of tourist circuits.

State govt also highlighted the issues related to Centrally Sponsored Schemes. They urged that Debt to GSDP norms should be customized to the rate of interest and rate of growth and not fixed rigidly in a doctrinaire fashion.

The Chief Minister submitted a detailed Memorandum to the Commission. The Chairman complemented the Govt. of Tamil Nadu for making an analytical presentation and stated that the issues raised would receive appropriate consideration during deliberations in the Commission.

15th Finance Commission which is on a 3 day visit to Tamil Nadu also sought views of the representatives from various political parties, local bodies and trade and industry. Yesterday, Commission also held enriching interaction with economists in Chennai.

Commission appreciated the warm hospitality extended by the State Govt. The Commission also looked forward to continuing interaction with the State Government based on today’s meaningful discussion. The Commission will finalise its recommendations by October 2019 after completing its discussions with all the State Governments, the Government of India and relevant stakeholders.

Devolution principles: balancing equity and efficiency in state transfers while accommodating demographic and fiscal performance concerns. Finance Commission will assess populist schemes in totality, avoid penalising states performing well on demographic and economic fronts, and balance equity and efficiency in intergovernmental transfers. It will make realistic GST revenue projections in consultation with revenue authorities, account for fiscal pressures from urbanisation, migration and ageing, and consider adjustments to vertical and horizontal devolution criteria-including environmental performance, demographic contribution and calibrated treatment for forested and tribal areas-alongside requests for flexible Debt/GSDP norms.