White Paper on Indian States (1950)/Part 9/Advantages of Integrated System of Federal Finance
Advantages of Integrated System of Federal Finance
202. The difficulties of a transitional period are unavoidable and must be squarely faced. But they should not be allowed to obscure the far-reaching and fundamentally beneficial character of the transformation that is implicit in federal financial integration. Under the new Constitution, the Central Government will conform to the pattern of other Federations and will function with the same rights and obligations throughout the country. In this way it will gain in strength and its policies in effectiveness. "Only so can the Union of India make an effective contribution to the solution of the difficult economic problems that face India, meet the strains and stresses of the post-war world and maintain national unity. The States themselves will also derive substantial advantages among which the following may be mentioned:—Firstly, their people end Governments will take their place in the polity of India alongside of the people and Governments in the rest of India and share in its wider life with equal rights and obligations. Secondly, administrative standards and efficiency will increase by closer contacts with the administration of the Central Government and especially by the uniform accounting and audit system which will result from the supervision of the Auditor-General of India, recruitment to the higher services on an all-India basis, a unified judicial system and access to technical advice and assistance furnished by the Central Government. Thirdly, States will have their share of such federal revenues as may be made divisible from time to time and of the grants, loans and other forms of financial assistance given by the Centre, on the same basis as Provinces; an impetus will thus be given to development programmes in these areas"[1].
203. From the standpoint of the country as a whole the advantages which will be derived from an integrated system of federal finance cannot be over-emphasised. The economic and fiscal contradictions and dangers inherent in the present situation will disappear. "There will emerge uniformity of law, rates, interpretation and administration of all federal fiscal measures resulting in uniform policies, principles and practice in the levy, assessment, and collection of Central taxes and duties. And tax-evasion, always a serious evil, will be more effectively checked. The abolition of internal customs duties will result in freedom of trade within the country. A co-ordinated trade and tariff policy will have a uniform impact throughout the country. Ports and other important links in the country's system of communications and transport will be free to serve their natural hinterlands. National and regional economic planning on all-India basis will become possible. In this, as in all other respects, the States will play their part, and they will become entitled to all the benefits which accrue from the execution of such plans as require the aid of Central resources and technical assistance.
"India will thus have an opportunity to emerge as a well-knit unit, fully integrated in all spheres, political, constitutional and economic. Its essential fundamental unity will be reinforced."[2]