Kerala, States Must Urge 16th Finance Commission to Address US Tariffs, GST Revisions: K.M. Chandrasekhar

Swift Summary

• Former Union cabinet secretary K.M. Chandrasekhar suggested Kerala and other States submit supplementary memorandums to the 16th Finance Commission, addressing new developments like US tariff policies and the proposed Goods and Services Tax (GST) revamp.
• The remarks were made during a round-table discussion hosted by the Gulati Institute of Finance and Taxation (GIFT) and the Kerala State Planning Board, focusing on “The impact of US penal tariff with a special focus on Kerala.”
• Chandrasekhar emphasized that these global market changes (e.g., Trump’s tariffs) need to be included in Finance Commission considerations.
• Kerala had initially submitted its memorandum in December 2024, requesting:

– An increase in States’ share of divisible tax pool from 41% to 50%.
– A revised formula for resource sharing among States.
– Additional allocations for disaster management.

• The Arvind Panagariya-led Commission is tasked with submitting its recommendations by October 31, covering revenue-sharing for April 2026-2031.

Indian Opinion Analysis

K.M. Chandrasekhar’s suggestion highlights critical economic concerns stemming from international trade dynamics like US tariff policies and domestic fiscal changes such as GST reform. While such issues are complex, his call underscores the need for dynamic policy frameworks capable of adapting to evolving global challenges impacting state economies. For a highly decentralized federal structure like India’s, balancing states’ financial autonomy with equitable national resource distribution remains crucial.

Kerala’s earlier requests-raising its share in tax revenues to address local socioeconomic priorities-mirror broader concerns among states seeking fairer fiscal accords under shifting macroeconomic conditions. Given that disaster-prone states have historically required greater support, arguments favoring increased disaster management funds merit careful consideration within this review cycle.

Ensuring that global economic disruptions are factored into future recommendations could help mitigate unexpected impacts at both state-level finances and broader economic planning nationwide.

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