Kerala asks Centre to reject Raghuram Rajan report

The Congress led UDF government in Kerala has asked Prime Minister Manmohan Singh to reject the Raghuram Rajan panel report evolving new formula for devolution of funds to states.

In a letter to Singh, Chief Minister Oommen Chandy urged the Centre not to accept the recommendations of the panel holding that the "new method would be totally against the provisions of the constitution and the concept of fiscal federalism".

The panel had made a case for ending 'special category' criteria to provide additional assistance to poorer states, as it ranked Goa and Kerala as the most advanced states and Odisha and Bihar the least.

The committee, headed by the then Chief Economic Advisor Raghuram Rajan (now RBI Governor) which was set up by the Centre amid demand for "special category" status by Bihar, suggested a new methodology for devolving funds on states based on a 'Multi Dimensional Index'.

Chandy said, "It would be totally against the provisions of the constitution the concept of fiscal federalism and the existing scheme of devolution of development funds by the Planning Commission to even consider any of the recommendations of the committee.

Stating that the methodology adopted by the committee was "seriously flawed" as it does not include major economic factors, Chandy said the Panel also had not held consultation with states and other stakeholders.

Expressing serious concern over the recommendations, Chandy also pointed out that the report has been prepared on a very short time of four months.

Distribution of resources as recommended by the panel would only help to aggravate existing imbalances, Chandy said.