NEW DELHI: The 15th Finance Commission led by N K Singh on Thursday met economists and domain experts to discuss its controversial Terms of Reference (ToR) which mandate to use 2011 Census data over the 1971 Census data for resource allocation to states.' Experts at the meeting suggested the Commission to consider both population and performance while allocating funds to the states and asked it to find new methods to strike a balance between equity and efficiency in its ToR.
The meeting was called after many non-BJP ruled states, including West Bengal, Odisha and southern states expressed displeasure over some of the ToR saying they "violate the federal principle as enshrined in the Constitution, erode autonomy of states, and bring significant financial hardship to all states".
The main reservation of the opposing parties is that they have succeeded in reducing the population growth rates in their respective state while the growth rates of most northern states including Bihar and Uttar Pradesh have remained comparatively higher. In this context, if FFC uses the 2011 Census data, more resources will be given to the northern states, thus penalising states that have succeeded in controlling population.
The experts agreed at the meeting that while weightage should be assigned to population, the states must be rewarded for population stabilisation policy. “The taxation capacity of states and any formula on devolution needed to be formed by equity, justice and uniformity. While the TOR were broad ranging, the commission has significant latitude defining its own procedure of work under the Constitution,” the Commission said in a statement issued after meeting.
The economists also said that the permissible limits on borrowings under Fiscal Consolidation roadmap needed to be equally applicable to Centre and States in the context of overall macroeconomic framework. The meeting was attended by Chief Economic Advisor Arvind Subramanian, Arvind Virmani, Pronab Sen, Kirit Parekh, M Govinda Rao, Surjit S Bhalla, Shankar Acharya, Abhijit Sen and D K Srivastava.