Amidst growing protests from southern Indian states, Karnataka took to the streets of Delhi, accusing the Centre of withholding its fair tax share, thus hampering its development capabilities. Kerala and Tamil Nadu also raised alarm over financial neglect and impending protests. The fissures in India’s fiscal federal framework drew attention with West Bengal Chief Minister Mamata Banerjee’s opposition to the Centre’s funding policies earlier in February. States are expressing their five-fold discontent: tax share discrepancies, cessation of GST compensation, borrowing constraints, selective disaster relief and biased infrastructure funding.
Karnataka, under Chief Minister Siddaramaiah, highlighted a loss of ₹62,098 crore due to the finance commission’s reallocated tax share, leaving them with a mere ₹12 to ₹13 return for every ₹100 contributed. Similarly, Tamil Nadu Chief Minister M K Stalin decried the Centre’s overreach in capping states’ borrowing, a move he claims undermines foundational fiscal federalism principles. The Centre, however, dispelled allegations of partiality, asserting unbiased fund distribution and citing procedural compliance as reasons for fund withholding for certain states, like West Bengal due to audit objections.
Kerala’s finance minister KN Balagopal reported a reduced state receipt by ₹57,400 crore, including the end of GST compensation and imposed borrowing limits. He pointed out inconsistencies in the Centre’s borrowing framework and its detrimental effect on the state’s financial autonomy. Tamil Nadu also echoed the imbalance in funding, comparing its share of central tax distribution to that of Uttar Pradesh, and highlighted setbacks in metro project funding and revenue losses post-GST.
The Centre defended its stance, countering Karnataka’s accusations as erroneous and emphasizing gains in finance commission allocations. It stated that cess collections like GST compensation cess are exclusively for state benefits. On February 8, Pinarayi Vijayan, Kerala’s Chief Minister, is set to lead a protest in Delhi against what he calls a ‘financial embargo’ by the Centre, having already approached the Supreme Court over the disputed net borrowing ceiling restrictions.