A Tweak To Make Fincom Recommendation Fairer

Finance commission recommendations are, technically, a zero-sum game, where a tweak in the criteria cannot be carried out to benefit all the states—a gain for some states is a loss for others.

- SRAJA SETHU DURAI

So, finance commissions always have a very tight rope to walk.

Until the 7th Finance Commission (FC), only two criteria for devolution were used—population and state contribution towards income tax collection, with 80-90 percent, and 10-20 percent weights, respectively. The 8th FC breaks this tradition and introduces multiple equity criteria, with per capita income distance getting more weight, and remaining a dominant criterion for the past eight commissions. Population and income distance constitute nearly 70 percent of the weights, and most of the remaining 30 percent is distributed across fixed geographic criteria like area and forest cover, with little weight assigned to efficiency.

We must wait to see whether the 16th FC paves a new direction by drastically changing the criteria by giving more weight to efficiency parameters, or follows the same path as their predecessors by slightly modifying the weightage, or reintroduces some of the past criteria so that there is no drastic change in inter se shares.