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16th FC and Tamil Nadu
November 25 , 2024
32 days
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- Arvind Panagariya said Tamil Nadu made a ‘masterclass’ presentation that was well-researched and comprehensive towards the 16th FC.
- He said that Tamil Nadu’s presentation really went into depth to make the case as to why it should be 50%.
- The issues being faced by the coastal States were highlighted in the state government’s presentation.
- The state said that the commission should reduce the weightage given to income distance, area, and forest and ecology while increasing that given to demographic performance.
- Tamil Nadu has asked the Commission to consider adopting a different method for measuring per capita income – from nominal to purchasing power parity (PPP) – while calculating ‘income distance’.
- Income distance is used to calculate the share of states in the divisible pool of taxes.
- It is the distance between a state's income and the state with the highest income.
- Tamil Nadu has sought reducing the income distance weightage from 45 per cent (as recommended by the 15th Finance Commission) to 35 per cent and demanded its calculation after adjusting for purchasing power.
- Income distance must be adjusted for PPP and population must be derived using the 1971 Census, it said
- The state has recommended increasing the demographic performance weightage from 15 per cent to 20 per cent and providing 10 per cent weightage for share of urbanisation.
- As for population, the 15th Finance Commission had given a 15% weightage, and used the 2011 Census population figures.
- The 15th Finance Commission had suggested a 12.5% weightage to the demo graphic performance variable, and Tamil Nadu had recommended that it must be increased to 20%.
- As a whole, the State had recommended a 35% weightage to the income distance, 20% each to population and demographic performance, 15% to contribution to the economy, and 10% to urbanisation.
- A state’s contribution to the national gross domestic product must get 15 per cent weightage.
- Gujarat and Telangana have made similar suggestions.
- For instance, if Tamil Nadu accounted for 8% of the country’s GDP, the State’s share, based on this criterion, would be 8%.
- Tamil Nadu has also sought increasing the vertical devolution (between the central government and states) from 41 per cent to 50 per cent.
- The Finance Commissions had not served the interest of Tamil Nadu, and that though the 9th Finance Commission had recommended a larger share for the State, its share had been declining.
- From the recommendation of the IX Finance Commission for 7.93% to that of the XV Finance Commission for 4.07%, the devolution share to Tamil Nadu has been consistently on the decline.
- The 15th Finance Commission had used a disaster relief index for partial devolution of disaster relief grants, but Tamil Nadu had some reservations on that.
- The decrease in the devolution to the States and the increasing share of the States in projects jointly implemented with the Union government were the two major factors that were adding to the burden of the State governments.
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