25 September, 2020

Federation Of The Penniless

Competitive populism, laxity in tax collection, myopic vision - these cardinal sins have driven states ever deeper into the red

Federation Of The Penniless
outlookindia.com
-0001-11-30T00:00:00+05:53

These are just tip-of-the-iceberg figures, mere pointers to an unprecedented financial precariousness. Forget Yashwant Sinha and the Centre for a while - if India is a federal country, its economy, as reflected in state balance-sheets, is sheer broke.

And a collapse in governance may follow. Already, yesterday's leaders like Punjab and Maharashtra (see box) are biting the dust. In April, the Centre drew up MoUs with 10 states (Bihar, Assam, Maharashtra, AP, Punjab, Himachal, Orissa, J&K, Rajasthan and UP) for advance payment of tax devolution and Plan funds in return for belt-tightening at home. Pacts that remained on paper, reveals a senior Planning Commission official. In September, financial institutions decided to blacklist 10 states for non-payment of dues and freeze further lending.Punjab had to mortgage the agriculture finance corporation building to meet current needs. In Assam, salary payments to three lakh government employees were frozen. Pushed to the wall, chief ministers took advantage of a meeting on the introduction of value-added tax (VAT) in Delhi last...

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