Post-GST, Union budget has less and less to indulge with states

CHENNAI: The first Union budget after the rollout of the Goods and Services Tax (GST) since July last year, presented to Parliament on Thursday by Finance Minister Mr Arun Jaitley is a fairly good indicator of how the Centre mediating with States through this fiscal instrument is undergoing a sea change.

This implies the traditional roof-top cries from State capitals to include at least one big-ticket project or scheme for their respective States, has less of semantic value with the fights, disputes and possible reconciliations over most taxes (which comprise a major chunk of all indirect taxes now subsumed under GST) having shifted to the new Centre-States interactive mechanism, the ‘GST Council’.

And since the Railway Budget has also been merged with Union Budget, even state-specific railway projects are not part of the calligraphy of the Finance Minister’s budget speech, barring a few major announcements. The States themselves will have to pour over the fine print of all the budget documents to get an idea about whether allocations for ongoing rail projects and the like have gone up or stagnating.

This does not mean that the States are totally ignored. Rather the mode of the Centre engaging with States has been undergoing a major overhaul since Mr. Jaitley presented the first BJP-led NDA government’s budget for 2014-15. Only that post-GST, this discourse has seen a sharper, qualitative change.

Though the number of Centrally-sponsored schemes have been radically pruned even since the UPA-II government’s days, now all Central government flagship schemes, whether it is the ‘Swachh Bharat Mission’ or the ‘Smart City’ programmes, a new mode of programme implementation has been set in motion that gives the district collectors and local governments more importance than the respective States or its Chief Ministers.

Further, with the dismantling of the Planning Commission and its substitution with ‘Niti Aayog’, new programme initiatives under the latter’s leadership have made States at best “team players in Team India led by the Prime Minister”. So, the cribbing in State capitals that the budget is not making even token or nominal references to them, though justified, faces new strong headwinds of change.

Thanks to Mr. Jaitley’s announcement that in 2018-19, the existing three per cent education cess on personal income tax (I-T) is being replaced with a four per cent ‘Health and Education Cess’ on personal I-T, to substantially fund the new major rural education and health programmes including those of BPL families, the redistributive logic of wealth creation is slowly changing in the country.

Contrary to the earlier wisdom that States and their Chief Ministers are much closer to their respective people, now the States and their people are to be “partners” in funding core governmental programmes across the country, as the number of I-T and GST filers surge ahead. Hence, there seems less need for the Centre to explicitly indulge the States through the annual budget speech.   

Mr. Jaitley himself mentioned today how the Centre looks forward to “working with the States to provide more resources for improving the quality of education in the country.” Even in fighting  ‘usurious’ interest rates menace, which farmers and rural poor are worst hit by in States,  he says that ‘Niti Aayog’, in consultation with State governments will evolve a suitable mechanism “to enable access of lessee cultivators to credit without compromising the rights of land owners.”

Luckily though, Tamil Nadu did find a couple of mentions in this year’s Central budget. Mr. Jaitley announced an outlay of Rs.7, 148 crore for the textile sector in 2018-19, which should bring some cheer to the hosiery and garment hub of Tirupur, the Integral Coach Factory (ICF) in Perambur, Chennai, a legacy of the Kamaraj era, to soon turn out state-of-the-art ‘Train sets’, and IIT-Madras to be made the ‘test bed’ for developing indigenous ‘5G’ wireless technologies.