BVR Subrahmanyam, the CEO of NITI Aayog, recently disclosed details of behind-the-scenes negotiations involving Prime Minister Narendra Modi and the Finance Commission of India. The disclosure sheds light on a concerted effort by the Modi government to significantly reduce funds allocated to the country’s states shortly after assuming office in 2014.
Immediately after assuming the role of Prime Minister, Narendra Modi engaged in backdoor negotiations with the Finance Commission of India to alter the allocation of funds to the states. The Finance Commission, an independent constitutional body responsible for determining states’ shares from central taxes, staunchly resisted Modi’s attempts. The head of the commission, YV Reddy, held firm against the proposed cuts, compelling the Modi government to reconsider its stance.
Faced with resistance from the Finance Commission, the Modi government was forced to hastily redo its maiden full budget within a mere 48 hours. The original plan to retain a larger portion of central taxes for the central government was abandoned, leading to significant cuts across various welfare programs. This sudden shift in budgetary allocations underscored the Finance Commission’s influential role in safeguarding states’ financial interests.
Simultaneously, Narendra Modi made false claims in Parliament, stating that he welcomed the Finance Commission’s recommendations regarding the allocation of tax portions to the states. This deliberate misinformation aimed to present a harmonious picture of cooperation between the central government and the Finance Commission, masking internal strife and disagreements over financial allocations.
The eye-opening revelations came from BVR Subrahmanyam, who served as a joint secretary in the Prime Minister’s Office and acted as the liaison in the backdoor negotiations. Speaking at a seminar on financial reporting organized by the Centre for Social and Economic Progress (CSEP), Subrahmanyam highlighted the opacity surrounding federal budgets. He acknowledged that the budgetary process is “covered in layers and layers of attempts to cover the truth,” suggesting a lack of transparency in the Indian government’s financial dealings.
Subrahmanyam’s admission marks a historic moment, as it is arguably the first time a high-ranking government official in the current administration has publicly acknowledged the government’s initial attempts to squeeze states’ finances. This revelation raises concerns, echoing the sentiments of states that have consistently expressed apprehension over reduced financial allocations.
The disclosure of behind-the-scenes negotiations and manipulations in the federal budget-making process underscores the challenges of transparency and accountability in India’s governance. As the details emerge, it prompts a critical examination of the delicate balance between the central government’s authority and the states’ autonomy, emphasizing the need for openness and honesty in the formulation of fiscal policies that impact the entire nation.
