15th Finance Commission–South should let 2011 population be–Economic Times–03.04.2018

Southern states are miffed over the mandate to the Fifteenth Finance Commission to use the population figures of 2011 instead of 1971 as a criterion while allocating among states their share of the taxes collected by the Centre. Their concern is that the shift penalises, instead of rewarding, the progress made by southern states in social development that has led to their populations stabilising rapidly, even as the populations of north Indian states continued to grow.

The 14th Finance Commission had assigned a 10% weight to the 2011 population to capture migration. Reportedly, preliminary estimates show that southern states would have received about Rs 20,000 crore less, had the 14th Finance Commission exclusively used the 2011 population figures.

Kerala’s finance minister Thomas Isaac wants alternate ways of compensation to southern states. He is right, subject to the norm that every citizen must have an equal right to resources of the central government, regardless of his place of residence, which has to be the starting point of any allocation of resources.

It is difficult to sustain using the 1971 census figures that grossly under-represent the northern states, which are relatively underdeveloped as well.

The equality consideration can be amended to accommodate underdevelopment, remote locations, poverty and special problems. To incentivise better performance, some weight can be given to positive achievements as well.

Finance commissions have, in the past, given weightage to efforts made to raise own revenue. The Terms of Reference of the 15th commission identify progress made in population stabilisation as a factor in allocation of resources. This can offset, to some degree, the effect of using the 2011 census figures for population, the basic criterion.

This piece appeared as an editorial opinion in the print edition of The Economic Times.
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