The opposition parties, including Congress, DMK, and CPI(M), claim the Centre's Viksit Bharat 2047 vision favors NDA-ruled states while others struggle to receive their promised funds.
Published Feb 12, 2025 | 9:00 AM ⚊ Updated Feb 18, 2025 | 4:18 PM
Opposition parties allege the Centre's Viksit Bharat 2047 vision favours NDA-ruled states while others struggle for funds.
Synopsis: Opposition parties have accused the Union government of failing to transfer more than ₹1 lakh crore in budgeted funds to states. They cite major cuts in centrally sponsored schemes and Finance Commission grants. The revised estimates for the 2024-25 financial year and spending numbers for previous years support these claims. This raises questions beyond mere funding allocations and leads to a debate about India’s model of equitable federalism.
Finance Minister Nirmala Sitharaman began her 2025-26 Union Budget presentation with Telugu poet Gurajada Apparao’s quote: “A country is not just its soil; a country is its people.” Yet, the Union government’s fiscal policies towards southern states contradicts this philosophy.
Prime Minister Narendra Modi called the budget “an important milestone in India’s development journey”. However, South India faces a different reality, receiving fewer grants and central scheme funds each year.
The opposition parties, including Congress, DMK, and CPI(M), claim the National Democratic Alliance’s Viksit Bharat 2047 vision favors NDA-ruled states while others struggle to receive their promised funds.
They accuse the Union government of failing to transfer more than ₹1 lakh crore in budgeted funds, citing major cuts in centrally sponsored schemes and Finance Commission grants. The revised estimates for the 2024-25 financial year and spending numbers for previous years support these claims.
The Union Budget 2025-26 projects a nominal GDP (Gross Domestic Product; the sum of all goods and services produced in a year) growth rate of 10.1 percent.
It sets the fiscal deficit (the difference between its spending and income from taxes and other revenues) target at 4.4 percent of GDP. The total budget expenditure stands at ₹50.65 lakh crore, with major allocations directed toward key sectors.
The actual spending of allocated funds for fiscal year 2025-26 will only be clear in the next budget. However, an analysis of 2024-25 revised estimates reveals significant disparities in fund distribution and state transfers.
In 2024-25, states collectively lost ₹1,16,212 crore in budgeted but unspent allocations by the Union government, from the following sections alone:
The Union government had budgeted capital expenditure of ₹11,11,111 crore for 2024-25 in the interim budget, but revised estimates put spending at ₹10,18,429 crore, a ₹92,682 crore decline.
Additionally, Grants in Aid for Creation of Capital Assets saw ₹90,887 crore left unspent nationwide. The Budget Estimate stood at ₹3,90,778 crore. However, actual spending remained at ₹2,99,891 crore, leaving a significant funding gap.
The Union government’s failure to fully allocate budgeted funds at both national and state levels raises serious concerns about fiscal priorities.
States expect crucial financial support for capital projects. However, the underfunding widens development disparities and limits state governments’ ability to implement key projects and welfare programmes.
Key welfare and development programmes suffered particularly from the under allocation of budgeted funds. Schemes for Scheduled Castes (SCs) and Scheduled Tribes (STs) faced a combined shortfall of ₹3,580 crore.
The shortfall included several key areas. The Post Matric Scholarship for SCs lost ₹860 crore. PM Vanbandhu Kalyan Yojana (for ST development) saw a reduction of ₹670 crore.
Eklavya Model Residential Schools (EMRS), which aim to improve education access for tribal students, lost ₹1,650 crore. The Strengthening Teaching-Learning and Results for States (STARS) programme faced a loss of ₹400 crore.
Women and child welfare programmes also suffered. Saksham Anganwadi and POSHAN 2.0 saw ₹1,029 crore remain unspent. PM Shri left ₹1,550 crore unutilised, affecting initiatives for improving school infrastructure and education quality.
The five largest centrally-sponsored schemes and Union government schemes – Jal Jeevan Mission, PMAY-Gramin, PMAY-Urban, PSU/JV/SPV (Railways) and PM Gram Sadak Yojana by themselves account for ₹95,734 crore in unspent allocations.
Southern states have consistently raised concerns over declining Finance Commission allocations. They have also questioned the Union Government's increasing reliance on cesses and surcharges, which it does not share with states.
Kerala's share in Finance Commission devolution has fallen sharply. It dropped from 3.88 percent in the Tenth Finance Commission (1995–00) to 1.92 percent in the Fifteenth Finance Commission (2020-21; 2021-26). This has severely strained its finances.
Andhra Pradesh faces a similar challenge. Its share in central taxes decreased from 18.62 percent in 2014-15 to 15.8 percent for 2021-25.
Karnataka has highlighted another concern: the rising share of Cess and Surcharge in Gross Tax Revenue. This increased from 8.1 percent in 2010-11 to 14 percent in 2024-25, further reducing the state's tax devolution.
Tamil Nadu Finance Minister Thangam Thennarasu points out that successive Finance Commissions have consistently penalised his state. Tamil Nadu's share in devolution has shrunk from 7.93 percent during the Ninth Finance Commission (1989–95) to just 4.07 percent under the Fifteenth Finance Commission.
This continuous reduction has cost Tamil Nadu an estimated ₹3.57 lakh crore. This equals 43 percent of the state's outstanding debt, severely affecting its financial stability and development plans.
Telangana expects to lose ₹14,151 crore between 2021-26 due to the Fifteenth Finance Commission's adjustments. Its share in central taxes has fallen from 2.437 percent (2015-20) to 2.102 percent (2021-26).
The state's non-tax revenue declined by 70.78 percent in FY24, worsening its financial crisis. The Union government's decision to exclude cesses and surcharges from the divisible pool has significantly affected all these states. In 2024-25 alone, cesses and surcharges will account for 23 percent of the Union's gross tax receipts, depriving states of much-needed revenue.
Five southern states – Tamil Nadu, Kerala, Andhra Pradesh, Telangana, and Karnataka – contribute significantly to India's GDP. Yet together they received only ₹27,338 crore (15.8 percent) from the ₹1,73,030 crore tax devolution in January 2025. In contrast, BJP-ruled Uttar Pradesh alone received ₹31,039.84 crore (17.95 percent).
Between 2015 and 2020, these five states contributed more than ₹22,26,000 crore in Good & Services Tax (GST) and direct taxes. However, they received only ₹6,42,000 crore in return, further highlighting the disparity.
The Union Government's borrowing restrictions have severely affected southern states' ability to manage their finances. This occurs despite many of them maintaining stable debt-to-GSDP (Gross state domestic product) ratios.
Kerala has repeatedly accused the Centre of denying borrowing permissions within the three percent GSDP limit. This has worsened its ongoing financial crunch. The end of Revenue Deficit Grants in 2024-25 has only intensified the crisis further.
Andhra Pradesh's projected fiscal deficit for 2024-25 stands at 4.3 percent. This exceeds the Fifteenth Finance Commission's recommended three percent limit. As a result, the state heavily depends on Central funding for critical infrastructure and other projects.
In 2021, the state amended its FRBM (Fiscal Responsibility and Budget Management) Act to manage its fiscal deficit. It set a five percent limit in 2021-22. The state aimed to reduce this to four percent by 2024-25. However, it has struggled to meet these ambitious targets. This shows how Centres’ policies impose financial burden on states.
Adding to the burden, Centrally Sponsored Schemes (CSS) now place a higher financial burden on states. For instance, Kerala must now fund 40 percent of project costs and bear 25 percent of land acquisition expenses for national highway projects. These requirements pose particular challenges given Kerala's high population density and land scarcity. Karnataka has expressed similar concerns, demanding that the Union Government fully cover these costs.
Meanwhile, the state has also pushed for an amendment to the GST (Goods & Services) Act, advocating for absorbing Compensation Cess into State GST (SGST) to give states more financial flexibility.
Southern states are facing significant challenges due to long-pending financial dues from the Union Government. This delays critical welfare programmes and infrastructure projects.
Telangana claims the Centre owes it more than ₹1 lakh crore. This includes ₹24,132 crore under the Andhra Pradesh Reorganisation Act, though the Centre acknowledges only ₹6,756 crore. The state is also awaiting ₹1,800 crore for backward area development. Additionally, ₹495.20 crore in CSS funds wrongly allocated to Andhra Pradesh remain unpaid.
Andhra Pradesh has similar issues. The state has highlighted how excluding cesses and surcharges from the divisible pool directly reduces its tax revenue share. Karnataka, meanwhile, wants immediate release of several funds: ₹6,000 crore in state-specific grants, ₹5,495 crore in special grants, and ₹3,300 crore across local bodies, health, and disaster relief. However, the Union Government has been slow to respond.
Karnataka has pushed for Central contributions to PMAY(Urban) and PMAY(Grameen). It also wants expedited railway projects and full funding for national highway expansions.
Tamil Nadu leads in industry, education, agriculture, and manufacturing. Yet it has repeatedly raised concerns over pending funds and financial discrimination. As of November 2024, ₹1,056 crore in MGNREGS wages remain unpaid, affecting more than 1.09 crore rural workers.
The state government has requested ₹1,635 crore from the Centre to clear wage arrears, to no avail.
The state also faces financial constraints under Grants in Aid for Creation of Capital Assets due to delayed Union fund releases. This restricts essential projects in education, rural development, and disaster management.
In contrast, projects in NDA-ruled states, however, have received substantial funding, suggesting political bias.
The Polavaram irrigation project in TDP-ruled Andhra Pradesh received ₹5,513 crore in 2024-25 and ₹5,936 crore in 2025-26, despite not appearing in the initial 2024-25 budget.
Meanwhile, Telangana is awaiting ₹1.63 lakh crore from the Centre for critical projects. This includes ₹34,367 crore for the Regional Ring Road (RRR), ₹24,269 crore for Hyderabad Metro Rail Phase-II, and ₹7,440 crore for the Godavari-Musi River Interlinking Project.
The Union Government has praised Tamil Nadu's Illam Thedi Kalvi scheme in the Economic Survey 2025. Yet has withheld ₹2,151.60 crore Samagra Shiksha Abhiyan (SSA) funds, crucial for teacher salaries, fee reimbursements, and educational development projects.
Similarly, the Union Education Ministry has linked fund disbursal to Tamil Nadu's acceptance of the controversial National Education Policy (NEP) provisions, which the state has strongly rejected due to its two-language policy.
The Union Government's neglect of disaster relief funding has become a major grievance in the south, particularly for Tamil Nadu and Kerala.
In 2024, Tamil Nadu requested ₹6,675 crore for Cyclone Michaung and extreme weather damages. However, the Union Government released only ₹944.80 crore, a legally mandated allocation due to all states.
Prior to that, the state had sought ₹37,906 crore for Cyclone Mandous and heavy rains but received just ₹276 crore – less than one percent of the requested amount.
Kerala has faced similar neglect. The Centre continues to drag its heels in releasing additional funds for Wayanad landslide victims, despite the Kerala High Court urging immediate action.
The state government conducted a Post-Disaster Needs Assessment (PDNA). It estimated a requirement of ₹2,219.033 crore for recovery and reconstruction. Kerala submitted this to the Centre on 13 November, 2024.
But, the Centre has insisted that Kerala exhaust its ₹394.99 crore balance in the State Disaster Response Fund (SDRF) before receiving further aid.
It further advanced two SDRF instalments totalling ₹291.2 crore, bringing available funds to ₹782.99 crore. However, the state government maintains this falls short given the scale of destruction.
Similarly, an Inter-Ministerial Central Team (IMCT) has assessed the Wayanad damage. Yet additional aid from the National Disaster Response Fund (NDRF) remains pending. This reinforces allegations that the Union government favours BJP-ruled states for swift relief allocations.
The Centre’s reluctance to release emergency relief funds has worsened financial instability in disaster-hit states, forcing them to divert essential resources from long-term development projects.
The growing financial imbalance between the Union and states has led to stronger demands for fiscal autonomy and reforms.
Tamil Nadu wants the Sixteenth Finance Commission to raise states' tax devolution share to 50 percent. Kerala and Andhra Pradesh, similarly want fairer tax distribution and greater borrowing flexibility.
Telangana insists on the release of ₹1 lakh crore in pending dues, while Karnataka has called for including cesses and surcharges in the divisible tax pool to ensure equitable revenue sharing.
(Edited by Dese Gowda)
