Commentary
Find our newspaper columns, blogs, and other commentary pieces in this section. Our research focuses on Advanced Biology, High-Tech Geopolitics, Strategic Studies, Indo-Pacific Studies & Economic Policy
Finance Commission's New Problem: A Separate Defence Fund
The original terms of references for the FFC themselves were contentious. Based on the wrong assumption that the last Finance Commission was overly generous towards the states, the terms were designed to nudge the FFC towards reducing the tax devolution to the states in order to meet the requirements of central schemes of the Union government. If that wasn’t enough, an additional term of reference has now been recommended by the Union cabinet tasking the FFC “to ensure an assured allocation of resources towards defence and internal security imperatives.”Allocating adequate, secure, and non-lapsable funds for the security of India is indeed an urgent priority. There can be no quarrel about that objective. But the move to provide for these funds through the FFC is problematic for several important reasons.Read the full article on Deccan Herald here.
Why the south-vs-north debate is a flawed way to analyse the 15th finance commission formula
If the objective of general-purpose transfers is to enable comparable levels of public services at comparable tax rates, it is only fair that the latest population data be used. Justifying the use of dated population data (1971 census) assumes that general-purpose transfers are levers for family planning. They aren’t. Family planning and population control are better managed through interventions on the expenditure side of budgets.The idea of punishing individuals elsewhere in the country just because these areas continue to languish goes diametrically against the Indian Republic’s spirit. If this argument of southern-versus-northern states is followed through, a direct corollary would be to also oppose money flows from Bengaluru to Bidar, or from Whitefield to south Bengaluru.
If this argument of south-vs-north is followed through, a direct corollary would be to also oppose money flows from Bengaluru to Bidar or from Whitefield to south Bengaluru.
The terms of reference for the 15th finance commission (FC) have come under attack from many quarters in the last few weeks. Of these, the most prominent line of attack is that using 2011 census data will end up hurting the interests of the southern states.Since their population is one of the factors considered while distributing tax revenues among states, some say the southern states will be punished for controlling their population. To resolve this moral hazard, a few southern states are demanding that the dated 1971 census be used for the FC’s revenue distribution formula.But this claim and the ‘north-vs-south’ debate sidestep other substantial flaws in the terms of reference for the 15th FC.Read more here>