Introduction

Tamil Nadu CM outlined the achievements of the ‘Dravidian Model’ government of the DMK, presenting them as blueprints for other states to follow.

Dravidian Model of Governance

Contribution to Indian Economy: Tamil Nadu’s contribution of nine percent to the Indian economy showcases the state’s robust economic growth.
GDP Ranking: Securing the second position in contributing to the Gross Domestic Product (GDP) of the nation, with a growth rate of 8.19 percent, surpassing the national average of 7.24 percent.
Inflation Control: The state has effectively controlled inflation, with rates falling to 5.97 percent compared to the national figure of 6.65 percent.
Export Preparedness: Topping the list of the Export Preparedness Index in the country, with a particular focus on leading in the export of electronic goods.
Industrial Investment Climate: Creating a favorable climate for industrial investment, elevating Tamil Nadu to the third position in the country from its previous rank of 14.
Education: Achieving the second position in the field of education and securing the first place in innovative industries.
Empowerment Initiatives: Prioritizing the welfare of women, young people, persons with disabilities, and marginalized communities, leading to significant improvements in their quality of life.
Scheme Implementations: Extensive distribution of assistance to people amounting to ₹6,569.75 crore, including initiatives like the Kalaignar Magalir Urimai Thittam, free bus travel for women, and healthcare schemes benefiting millions of citizens.

Overview of Fiscal Federalism: Fiscal federalism delineates the financial powers and responsibilities among different levels of government.
Provisions Related to Centre-State Financial Relations: The Indian Constitution elaborates on tax distribution and grants-in-aid, supplemented by the role of the Finance Commission.
1. Part XII of the Constitution: Details provisions regarding the distribution of taxes, non-tax revenues, borrowing powers, and grants-in-aid.
2. Article 268 to 293: Specifically address financial relations between the Centre and States.
3. Finance Commission (Article 280): Constitutional body responsible for recommending tax revenue distribution and fiscal discipline.
Challenges with Fiscal Transfers: Despite recommendations to increase devolution, there has been a reduction in financial transfers to states, posing challenges to fiscal autonomy.

Centralization of Fiscal Powers: The Union government’s increasing control over fiscal powers challenges state autonomy.
Erosion of State Tax Autonomy: Implementation of VAT and GST has diminished states’ ability to set tax rates independently.
Constraints on State Expenditure Flexibility: Conditional grants limit states’ discretion in allocating funds according to local priorities.
Uniform Fiscal Targets Neglecting State Variations: Uniform fiscal targets fail to address the diverse needs of individual states.
Impact of GST Implementation: The GST implementation has shifted tax burdens and reconfigured fiscal dynamics among states.

Re-examining Tax-sharing Principles: Finance Commissions should review tax-sharing principles to align with changing fiscal dynamics.
Redesigning Statutory Sharing of Indirect Taxes: Vertical and horizontal devolution mechanisms need re-evaluation to ensure equity and efficiency.
Calculating and Allocating Collection Costs: Methods for calculating and allocating collection costs should be devised to enhance tax efficiency.
Redesigning Grant Mechanisms: Existing grant mechanisms should be restructured to address evolving fiscal challenges.
New Institutional Structures: Establishing formal relationships between the GST Council and Finance Commission can enhance fiscal governance.

Tamil Nadu’s governance model, exemplified by Chief Minister Stalin’s comprehensive overview, underscores the state’s commitment to economic progress, social welfare, and inclusive development.
Despite challenges in India’s fiscal federalism, Tamil Nadu’s achievements serve as a beacon of hope, demonstrating the potential for states to thrive under effective governance models.
Addressing fiscal imbalances and enhancing cooperative federalism are imperative for ensuring equitable distribution of financial resources and fostering sustainable development across the nation.