The Karnataka CM’s argument against the Modi government has been that performance and progress is being punished and funds collected from high GSDP (Gross State Domestic Product) states are given to populous ones like Uttar Pradesh and Bihar, among others, to gain political dividends.

“States with higher GSDP per capita, like Karnataka and others, are being penalised for their economic performance, receiving disproportionately lower tax allocations,” the CM stated.

Sandeep Shastri, a psephologist and V-C of Bhopal-based Jagran Lakecity University, told ThePrint that Siddaramaiah had invited the CMs of high-revenue generating and revenue contributing states without compromising on the need to redistribute funds to their poorer counterparts.

“Siddaramaiah has been trying to drive home the point or raise the question of the states’ shares in revenues,” he said.

“It is believed that the southern states have a greater amount to lose,” said a Bengaluru-based economist

Even members of Siddaramaiah’s Congress party in Karnataka acknowledge that the argument extends beyond economics as it is more than just about “fiscal federalism” but also about “political federalism”.

At the conclave of finance ministers of five states in Kerala’s Thiruvananthapuram Thursday, Krishna Byre Gowda, Karnataka’s minister for revenue and the state’s representative at the Goods and Services Tax (GST) Council, said the need to discuss political federalism was just as important.

“If delimitation happens according to the upcoming Census, then it is very much possible that all of us will lose our representation in Parliament,” Gowda said at the event that was meant to highlight the need for a united front to secure a fair share in the 16th Finance Commission.

Siddaramaiah has been the CM of Karnataka twice (2013 to 2018 and 2023-present) and in both terms, the 77-year-old has emphasised on the “injustice” meted out to Karnataka’s population by the Modi-led Bharatiya Janata Party (BJP) for derailing its poll juggernaut in the 2023 assembly elections as well as the Lok Sabha polls.

After the Janata Dal (Secular) or JD(S) allied with the BJP, Siddaramaiah has postured that only he can demand Karnataka’s rightful share from the Centre.

Reacting to the CM’s conference call, Amit FMalviya, the BJP’s head of IT, said in a post on ‘X’ Thursday: “Chief Minister Siddaramaiah’s outrage over tax devolution to Karnataka is not only misguided but also duplicitous. He is trying, in vain, to blame everyone else except his government for the lack of funds, after mindless splurge on ‘freebies’.”

Chief Minister Siddaramaiah’s outrage over tax devolution to Karnataka is not only misguided but also duplicitous. He is trying, in vain, to blame everyone else except his Govt for the lack of funds, after mindless splurge on ‘freebies’.

On Sept 2, 2013, the Congress-led UPA… https://t.co/x8NFZ3Due0

— Amit Malviya (@amitmalviya) September 12, 2024

Also Read: Karnataka caste census still under wraps, here’s a look at the complex equations dictating its fate

‘Clock comes full circle’ 

Siddaramaiah is not the first Karnataka CM to have taken the battle to the Centre regarding matters of the southern state.

Shastri recalls how former Karnataka CM Ramakrishna Hegde in the early 1980s held a series of conclaves on ‘Centre-State relations’, largely by rallying non-Congress CMs against the then Indira Gandhi-led central government.

In August 1983, Hegde addressed a conference on Centre-State relations which he had organised to call out the interference of the central government through the office of governors.

In September, he tabled an official document in the state assembly, ‘White Paper on the Office of the Governor’, according to a 2021 article by the late jurist A.G. Noorani in Frontline magazine.

All these conclaves would then go on to become one of the basis on which the Sarkaria Commission on Centre-State relations was set up in 1983.

“The clock is coming full circle,” Shastri said of Siddaramaiah taking a leaf from his predecessor.

Siddaramaiah has also been at the forefront of opposing the imposition of Hindi and celebrating of Hindi Diwas, protesting against the “three-language policy”, replacing the National Education Policy (NEP) with a state education policy, decrying attempts to merge Karnataka’s dairy cooperative Nandini with Gujarat-based Amul, and accusing the Modi government of trying to wipe off Karnataka’s identity.

He has further emphasised that the BJP would not stand for the rights of Karnataka or its people, language or culture, and has made it clear that he would not subscribe to the party’s attempts to make India a homogenous monolith with “one nation, one language”. 

The BJP in Karnataka has attempted to capitalise on the rift within the state Congress unit, taking out a padayatra against the MUDA “scam” and cornering the government over the alleged diversion of funds from the state-run Karnataka Maharshi Valmiki Scheduled Tribe Corporation.

This, however, has helped the Congress—and Siddaramaiah—emerge stronger, as even his main challenger, D.K. Shivakumar, backed the CM, going so far as to say that he would complete a full five-year term.

The Congress cannot easily replace Siddaramaiah over fears of antagonising the backward classes whom he represents and giving the opposition the room to destabilise the government after the party swept the last year’s state elections.

‘State losing out’  

Karnataka is among the fastest growing and biggest economies in India.

According to Shastri, the credit for India’s growth story, becoming the fifth largest economy, goes to the Centre as well as states. But much of this has been attributed to “India’s rise” after Modi took over at the Centre in 2014.

However, there are glaring inequalities within every administrative unit in the nation—taluk, district, and state.

Economists say that Karnataka, particularly Bengaluru, accounts for nearly 40 percent of the country’s software exports but this money goes to the Centre’s kitty. In the post-GST era, states are left with few revenue streams such as excise, stamps & registration, cess on fuel, transport and a few others.

Though states like Karnataka, Maharashtra, Tamil Nadu and Gujarat continue to power the economy, some of them complain about what comes back.

In his 2024 budget speech, Siddaramaiah said there was a loss of over Rs 59,000 crore to Karnataka over the “unscientific implementation” of GST and of over Rs 62,000 crore under devolution of central taxes due to the new calculation under the 15th Finance Commission.

Karnataka’s share in central taxes has gone down from around 4.7 percent to around 3.6 percent, according to the 15th Finance Commission.

However, BJP’s Malviya said it was the Congress-led United Progressive Alliance (UPA) government that had suggested this reduction.

“Siddaramaiah would be best advised to direct his misplaced rage at Rahul Gandhi or for that matter (former Reserve Bank of India Governor) Raghuram Rajan, who, presumably under the instruction of Sonia Gandhi-led NAC (National Advisory Council), decided allocations for southern states. Instead, he misdirects his frustration toward the BJP-led NDA, which has no role in these changes,” he wrote in his post.

“Siddaramaiah is indulging in sinister politics that benefits no one, except his own political ambitions. The Congress government of Karnataka is essentially protesting its own decisions, proving this is nothing more than empty rhetoric to stir emotions without addressing facts,” Malviya added.

There are also palpable fears that the growing number of migrants will continue to take away more jobs from Kannadigas, prompting the mooting of the “reservation for locals” bill. But outrage from industry bodies and captains forced the Siddaramaiah government to roll it back.

The Bengaluru-based economist quoted earlier explained that when there is a short-term migration, it leads to outflow of resources.

The economist said that in the GST era, income is based on where the money is spent rather than where it is earned, indicating that migrants earn in Bengaluru but send or invest this in their home states.

He further said that Karnataka has been trying to get the Centre’s attention over the disproportionate share of revenue coming back to the state. According to Siddaramaiah, Karnataka gets back just around 15 paise for every rupee it contributes to the central coffers.

(Edited by Nida Fatima Siddiqui)

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