HYDERABAD: This may sound bizarre, but it's true. Telangana is suffering because it is performing. With its income growing at a much faster rate than the country's average, the State is going to lose Rs 14,151 crore in the next five years towards Central tax devolution due to the recommendations of the Fifteenth Finance Commission (FFC).
According to the Telangana Socio-Economic Outlook 2021's analysis of the FFC's recommendations, the loss during 2021-26 would be massive as compared to the recommendations of the Fourteenth Finance Commission.
"The 15th FC recommended that vertical devolution of the Union's shareable taxes be maintained at 41 per cent for the period of 2021-26. Allocation of this 41 per cent among the States would be determined by different parameters," it stated.
"The 15th FC has added two new parameters - demographic performance in terms of variation in total fertility rate and State tax and fiscal efforts, and changed the weights of the previous parameters recommended by the 14th FC. Additionally, it used the population census of 2011, as prescribed in its terms of reference, instead of the 1971 census adopted by 14th FC," it added.
As a result, Telangana's share in Central taxes has decreased to 2.102 per cent for 2021-26, which follows a reduction from 2.437 per cent in 2015-20 to 2.133 per cent in 2020-21, the Socio Economic Outlook stated.
"The State's share has decreased because its income has been growing at a much faster rate than the Indian average, which has resulted in a lower weightage in the horizontal devolution share," it stated.
It is estimated that this would result in a loss of Rs 14,151 crore over the next five years, considering the estimated divisible pool available with the Central government during 2021-26. This is due to an estimated reduction of the State’s share from Rs 1,02,957 crore (computed based on 2.437 per cent) to Rs 88,806 crore, as estimated by the Fifteenth Finance Commission.
Telangana government's share in Central taxes dropped to 2.102 per cent for 2021-26, which follows a reduction from 2.437 per cent in 2015-20 to 2.133 per cent in 2020-21 because its income has been growing at a much faster rate than the national average