Karnataka CM Siddaramaiah defends Raghuram Rajan; dismisses BJP's allegations on tax reduction

Raghuram Rajan

Karnataka CM Siddaramaiah on February 12 defended former RBI governor Raghuram Rajan from BJP’s allegation of the latter's involvement in tax reduction, stating they are 'unfounded' and 'misleading'.

This follows reports suggesting that the Congress party may nominate Rajan to the Rajya Sabha, either from Karnataka or Maharashtra.

"In light of the recent statements made by certain BJP leaders, including its Karnataka president BY Vijayendra, regarding the devolution of funds to Karnataka and the involvement of a committee headed by former RBI Governor Raghuram Rajan, it is imperative to set the record straight with facts and evidence," Siddaramaiah wrote on X (formerly Twitter).

The CM emphasised the need to understand the mandate of the Committee for Evolving a Composite Development Index of States, headed by Rajan. "Contrary to the claims made, the committee's primary objective was not to recommend changes in the states' share of tax revenue. Instead, its purpose was to identify backward states based on various criteria, thereby helping in the equitable allocation of development funds to address regional disparities."

Committee focus

Siddaramaiah clarified that the committee's focus was on ensuring a balanced distribution of certain development funds to enhance the overall growth and progress of all states, particularly those lagging in specific development parameters.

He further explained that the recommendations made by the committee were explicitly intended to guide the allocation of certain development funds from the Centre to the States. These recommendations were not meant to replace existing methodologies for the devolution of tax allocation.

"It is also important to note that the Finance Commission, which is constitutionally mandated to determine the distribution of tax revenues between the Centre and the States, operates independently of the committee mentioned above," the Karnataka CM stated.

Siddaramaiah refuted the claim that the Finance Commission accepted the committee's report and that the committee influenced the reduction in Karnataka's tax share. He highlighted that the subsequent 14th Finance Commission report contradicted such allegations, proposing an increase in the devolution of taxes to Karnataka.

"The narrative suggesting that the committee headed by Dr Raghuram Rajan recommended a reduction in Karnataka's share of tax revenue is not only inaccurate but also a misinterpretation of the committee's role. It is unfortunate how people in responsible positions post fake narratives to push their agenda. It is in the DNA of BJP to spread fake news," he stated.

BJP Karnataka President BY Vijayendra had alleged that the reduced tax share for Karnataka from 4.13 to 3.79% was suggested by a Congress-appointed Committee headed by Rajan.

Siddaramaiah responded, questioning whether the 15th Finance Commission constituted in 2019 by Narendra Modi's government was influenced by a committee's report from September 2013.

Karnataka Congress legislators, led by Siddaramaiah, held a protest at Jantar Mantar in New Delhi on February 7 over alleged 'financial injustice' from the Union government. Siddaramaiah claimed the state lost Rs 1.87 lakh crore during the last five years under the 15th Finance Commission, emphasising the need to address the step-motherly treatment of the Union government and protect the interests of Kannadigas.

Also read:  ‘Delhi Chalo’ stir: Siddaramaiah, Cong legislators protest Centre’s ‘financial injustice’