‘Make states compete with each other’: Amartya Lahiri on Centre-state finance tussles

Disputes between the Centre and states over economic policies have a long history in India.
In recent years, however, the frequency and intensity of such tussles have only increased with states such as Karnataka and Kerala accusing the central government of shortchanging them. 

“We don’t take sufficient advantage of the our (India’s) federal structure, we have traditionally ended up relying too much on the Centre,” said Amartya Lahiri, professor at the University of British Columbia.

Lahiri was speaking during a session with Arvind Panagariya, Chairman, 16th Finance Commission of India, moderated by Aroon Purie, Chairman and Editor-in-Chief, India Today Group, at the 4th Columbia India Summit hosted by Columbia University in New York.

As a solution, Lahiri stressed on fiscal federalism in a more enhanced way. 

“Are we getting the states to compete with each other in terms of best practices…demonstrating the fact that you could lose business, if you are not.”

Lahiri said in the current scenario, it seemed too easy for the states to complain that the Centre was “squeezing stuff”, adding that while some of the concerns raised by them may be valid but some could be political posturing.

“This apprehension that some states are being discriminated against is a politically-vitiated narrative which, I am sorry to say, vested interests are happy to go about saying,” finance minister Nirmala Sitharaman had said on the tussles. 

Lahiri wants Centre to take this policy up on board as a solution. “It is important to take that option away because it is easy for misfunctioning states to hide behind the claim that the “Centre messed us up”.