Back developing States, KTR to Centre

Hyderabad: The States are the driving force behind the country’s economic progress and the Centre must cooperate with them to compete in economic progress at international level, said IT and Industries Minister KT Rama Rao. He urged the Union government to extend financial support to States like Telangana which have potential to further accelerate the […]

Hyderabad: The States are the driving force behind the country’s economic progress and the Centre must cooperate with them to compete in economic progress at international level, said IT and Industries Minister KT Rama Rao. He urged the Union government to extend financial support to States like Telangana which have potential to further accelerate the nation’s development. Telangana was recognised as the fourth largest contributor to the country’s GDP (Gross Domestic Product).

Participating in the video conference of the Chief Ministers and the Finance Ministers of different States, which was chaired by Union Finance Minister Nirmala Sitharaman, Rama Rao along with Finance Minister T Harish Rao put forward a strong argument on the need for the Centre to extend support to progressive States like Telangana which could be beneficial to the entire country. He highlighted the urgency for the Central government to take appropriate steps to increase the investment percentage in GDP, which has tumbled down from 39 per cent in 2011-12 to 29.3 per cent in 2021-22, hurting the nation’s economy severely.

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“In the aftermath of Covid-19, companies that have invested in China are eager to invest in India where there are plenty of opportunities for growth. We must seize this opportunity. Although FDI (Foreign Direct Investment) inflows have improved, there is still room for improvement. The decision to lend 0.5 per cent of GSDP to States that have achieved capital expenditure targets is a welcome move,” the Minister said. He informed that Telangana follows the rule that the loans should be taken only to spend on capital projects.

Accordingly, he wanted the Centre to increase the FRBM (Fiscal Responsibility and Budget Management) credit limit to two per cent. A developing State like Telangana has the potential to function more effectively if the Union Finance Ministry simplifies the rules and cooperates. This policy will further boost job creation in the States, he added.

Rama Rao sought investment subsidies in sectors such as textiles, garments, toys, leather goods, light engineering goods, and footwear, to create more unskilled jobs, increasing their ability to compete in industries at international markets. Given that MSMEs contribute 30 per cent to the country’s GDP, he suggested extending Product Linked Incentives (PLIs) to them and also provide the interest subsidy to the developing companies of all sizes.

The Centre must focus on areas with ecosystems and synergies, rather than running into the abyss in terms of investment subsidies. The proposed Kakatiya Mega Textile Park in Warangal was a good example, he cited. He asked the Union government to conduct a SWOT (strengths, weaknesses, opportunities, and threats) analysis on conditions of the States and identify the favourable climates and extend support for them to compete internationally.

“For example, Telangana does not have a beach. Therefore, opportunities should be provided for the establishment of dry ports. The next ten years will see the largest number of job creation opportunities in the textile, electronics and life sciences. So these sectors should be encouraged by the Central government,” he said.

Rama Rao pointed out that the Centre had shelved the IT Investment Region sanctioned to Telangana State and was not responding to its plea to establish six industrial corridors. He urged the Union government to consider the requests made by Telangana which has necessary ecosystem in the defense, electronics, textiles and pharmaceuticals industries. Kazipet Railway Coach Factory and Bayyaram Steel Factory, were restricted to papers.

To make investments available for the States, he asked the Central government to allow Sovereign Funds and Pension Funds to be used as capital investment. “The Centre is a policy-maker and it is the responsibility of the States to implement these policies. The States are required to provide basic amenities such as water, land and human resources for industrial development. “In this context, certain powers should be decentralised to strengthen the States, to maintain the spirit of a co-operative federalism,” he said.

The Minister demanded that more money should be provided to the States through tax devolution and wanted the Centre to rationalise cess such that States receive more resources through tax devolution. He pointed out that the ‘divisible pool’ was shrinking further with the imposition of increased cess day by day. He argued in favour of institutional reforms, to overcome certain challenges faced in various sectors.

He also wanted the Centre to immediately release certain tax concessions for industrial promotion as well as Rs 900 crore pending to backward districts in Telangana State, as per the Andhra Pradesh Reorganisation Act. He demanded that the recommendations of the 15th Finance Commission providing special grants to Telangana, be fully implemented.

Special Chief Secretary for Finance K Ramakrishna Rao, Principal Secretary for IT and Industries Jayesh Ranjan, Government Financial Advisor GR Reddy, Finance Secretary Sridevi and others, were present.

Also Read: Plenty of opportunities for investors: KTR

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