Home / News / India /  Centre-state fiscal ties are not transactional: Nirmala Sitharaman

New Delhi: Finance minister Nirmala Sitharaman has said that the Centre-state fiscal relation is not a transactional one and that the devolution of central taxes to states as decided by Finance Commissions is geared for the overall development of the country.

Speaking at the CNN-News18 Town Hall in Chennai on Monday evening, the minister said that the Finance Commissions have been alive to the demands from Southern states for higher devolution of Centre’s taxes to them.

The minister was responding to questions on grievances of Southern states which have successfully contained population growth and also contribute to Centre’s taxes but the population-linked fiscal transfers from the Centre to states put them at a disadvantage compared to northern states.

The minister explained that the comparison of how much one state gets against the transfers to another state was not a desirable one. “Will a country prosper if it constantly draws this kind of artificial line… That is a very convoluted argument to say I am giving so much, you give so much... It is no transactional relationship. We are all part of the entire system which has to improve…," the minister said at the event.

Sitharaman acknowledged that the concerns of Southern states were valid. Many states in the South—Kerala onwards--has this very valid question to ask, the minister said.

Sitharaman said that there have been some corrections to make up for it, which may or may not be adequate. “But the fact of the Finance Commission took the route of making up for it at some level, proves, there is a recognition of the problem. There are ways in which they are making up for it. The issue is live. What would be adequate, is difficult to estimate," the minister explained, adding that formulas can be contentious.

The minister also spoke on the rupee’s depreciation against the dollar. “Due to the strength of our micro economics fundamentals, rupee is holding out well. The rate of fall of other currencies vis-à-vis the US Dollar has been sharply much more than the Indian rupee. Is this a consolation? Partly yes, because the strength of your economy speaks when you are talking about your exchange rate and as a result we are far better than other many countries whose currencies have fallen far pathetically against the US Dollar," the minister said.


Gireesh Chandra Prasad

Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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