Syllabus: GS-II, Subject: Polity, Topic: Federalism, Issue: Fiscal Federalism
Issues in financial relations:
- Decline in share of southern state in divisible pool of taxes ( from 21.1 per cent during 2000-05 to 15.8 per cent during 2021-26)
- Dependence of low-income state on transfer from center- Bihar (75%) U.P. (53%)
- In spite of increase in state’s share in divisible pool of taxes (11th FC -29.5 to 41% in 15th FC), the divisible tax pool itself has shrunk (88.6% in 2011-12 to 78.9% in 2021-22).
The way ahead:
- Higher weightage could be assigned to parameters such as demographic performance, tax efforts and fiscal position.
| One mark extra for mains ( data point)
·        The adjusted share of state in divisible pool of taxes after surcharge and Cess is only 34%. ·     Share of southern state in divisible pool of taxes: o  21.1 per cent during 2000-05 o  15.8 per cent during 2021-26 |
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