A post as a financial planner in Muthukrishnan on the social media platform X sparked a new debate on central financial relations, in particular with regard to the economic contributions of Tamil Nadu to the government of the Union.
Muthukrishnan questioned the frequent ads of the center on financial assistance provided to Tamil Nadu while apparently ignoring the revenues generated by the State for the Union government. He argued that in a federal structure, financial exchanges should be considered reciprocal rather than unilateral assistance.
“Whether it is the Minister of Agriculture or Finance, they list how much they give Tamil Nadu. But there should be a feeling of equity. They should also list how much they receive Tamil Nadu. Not only the Tamil Nadu, all the developed states give more than what they receive,” he wrote.
Muthukrishnan’s remarks reflect a higher debate in progress on budgetary federalism in India, where economically stronger states often contribute more to the tax center than they receive in allowances and subsidies. The Tamil Nadu, being one of the most industrialized states and the most generating income from India, is one of those who contribute much more to the national chessboard than they receive in the central funds.
The financial expert pointed out that the center position often gives the impression that Tamil Nadu is in fact a favor, while in reality, the State plays a major role in the financing of national projects and subsidies which also benefit other states.
“So why does the center continue to emphasize what it does for Tamil Nadu? To make the discussion right and balanced, let the center also say how much it receives from Tamil Nadu,” he added.
Tamil Nadu, as well as other developed states such as Maharashtra and Karnataka, have previously expressed concerns about the distribution of income. Experts argue that higher tax contribution states receive allocations disproportionately compared to their contributions, leading to requests from a more transparent and balanced budgetary policy.
The Muthukrishnan position has rekindled discussions on the need for a transparent rupture of financial transactions between the Center and the States, ensuring that allowances are not considered a unilateral generosity but within the framework of a structured economic system where states contribute and receive funds accordingly.
Last month, Reuters said the government was trying to reduce central tax revenue that it shared with states at least 40% compared to the current 41%.
