Kerala opposes Raghuram panel report

Chief Minister Oommen Chandy will convey the State’s objections to the report of the Raghuram Rajan Committee for evolving a composite development index of States to Prime Minister Manmohan Singh during his visit to Delhi on Friday.

The Chief Minister left for Delhi from Thiruvananthapuram on Thursday morning. He is going via Bangalore to meet Karnataka Chief Minister K. Siddaramaiah to take up issues related to imprisonment of PDP leader Abdul Nasir Maudany without bail, ban of night traffic to Wayanad through Bandipur sanctuary and Nanjangud-Nilambur railway line project.

On reaching Delhi (on Thursday evening), he is expected to call on the ailing Defence Minister A. K. Antony and hold political discussions with Congress high command and meet Union Minister for Human Resources Development M. M. Pallam Raju among others.

Kerala government is of the opinion that the Raghuram Rajan report is against the provisions of the Constitution, the concepts of fiscal federalism and the existing scheme of devolution of developmental funds by the Planning Commission. It did not want the Centre to consider any of the recommendations of the report for implementation. Kerala is planning to submit detailed comments on the report later after exhaustive examination.

It is observed that the report of the committee itself mentioned that its recommendations might be used to allocate some of the developmental funds even while stating that the report is not intended to replace existing methodologies for allocation of funds by the Centre to the States. But, there is no uncommitted corpus of funds with the Centre that can be allocated as recommended by the committee. For devolution of Plan funds, there are established methods.

The State government feels that the methodology adopted by the committee is seriously flawed as it does not include major economic factors such as agriculture production, production of manufactured goods or power generation in shaping the index. As a result, many advanced States would be eligible for higher allocation of resources. This will aggravate existing imbalances.

Kerala agrees with the view expressed by committee member Shaibal Gupta in his dissent note that the choice of monthly per capita consumption expenditure in place of per capita GSDP is out of place. Per capita consumption does not reflect production and income derived from production. In States like Kerala with inflow of foreign and domestic remittances, per capita consumption would give distorted picture of development.

Dr. Gupta had pointed that per capita consumption expenditure also does not take into account the difference in prevailing level of inflation in different States. The State government wants the Centre to take into account Dr. Gupta’s statement that price differentials among States could be as high as 30 to 40 per cent. It also notes that the report does not take into account the fiscal capacity of the States.

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