Impressed by the presentation made by Telangana Govt on finances: XVI Finance Commission

XVI Finance Commission impressed by Telangana's finances and development plans.

The XVI Finance Commission headed by noted economist Arvind Panagariya has said it is impressed by the presentation made by the Telangana State Government on the state of finances and its development plans going forward.

“We had very frank discussions with the State. The State Government has refreshingly briefed us about the finances, about the numbers of liabilities on budget and off budget. The State was very upfront about its finances and how they see the finances going forward,” Dr. Arvind Panagariya said at a press conference held at Mahatma Jyotiba Phule Praja Bhavan in Hyderabad on Tuesday (September 10, 2024).

Dr. Panagariya was replying to queries on the requests made by the Telangana Government including enhancement of devolution of divisible pool of taxes to 50 per cent from the existing 41 per cent. The Commission held two day discussions with the stakeholders which concluded with a presentation made by Chief Minister A. Revanth Reddy on Tuesday (September 10, 2024). The Commission had completed its visits to six States – Maharashtra, Chhattisgarh, Punjab, Rajasthan, Karnataka and Telangana with 22 States still to be covered for making recommendations on tax revenues for five years from 2026-27 to 2030-31.

When asked whether the Commission would consider tweaking the percentage of devolution in favour of the States given the fact that situation at the Centre reflected economic buoyancy, he said, “at this point, I don’t know what the Commission will decide as the process to finalise the recommendations will take time.” The Commission, Dr. Panagariya said, received representations for strengthening fiscal federalism and allocation of more funds to States and the States were vocal in raising their concerns.

He said the Commission was ‘very impressed’ with the development plans of Telangana, especially on urban development. According to him, urbanisation generally took a back seat in the development process in the country.

“Nobody can actually neglect rural development that is absolutely essential for all sorts of reasons. But, this is a State which is also bringing urban development to the forefront from what I heard,” he said adding Telangana was thinking far ahead in terms of urban development. Dr. Panagariya said this was not an area for the Finance Commission,but the Commission was quite pleased to see the road map they (the Telangana Government) laid out on that front.

Asked about the concerns expressed by the States over the cesses and surcharges being collected by the Centre directly, he said surcharges were not part of the divisible pool. “The Government of India is statutorily obligated to devolve 41% of funds to the States from divisible pool,”he said. In this context, he said it was for the Central Government and the States for reaching an understanding on devolution of cesses and surcharges. There was a need for a Constitutional amendment in this direction.