Syllabus: GS- II, Subject: Polity, Topic: Federalism, Issue: Fiscal Federalism
Context: Southern Indian states worry about getting less money from successive Finance Commissions devolutions.
Reason for decline:
- The income distance criterion, which assigns higher shares to states farther from the highest income state,
- The shift from using 1971 population data to 2011 data by the Fifteenth Finance Commission
The way ahead:
- Consider reducing the weight of the income distance criterion
- Limit cesses and surcharges to 10% of the Centre’s gross tax revenues to prevent reduction in the size of the divisible pool.
| +1 Advantage for Mains (Data Point):
· Southern states experienced a loss of more than 8% points due to the distance criterion between the Thirteenth and Fifteenth Finance Commissions.
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