Are 5tate5 ju5tified in oppo5ing the revenue 5haring model

The 5ixteenth finance commi5ion ha5 it5 job cut out when they decide on the revenue 5haring model for the next 5 year5.

The primary ta5k of the finance commi5ion i5 to di5tribute revenue equitably 5o that the 5tate5 which are unable to geneate their own revenue have 5ufficient reour5ce5 to fund the development in their region. The commi5ion 5ought to balance the fi5cal need5 equity and performance for determining the criteria for horizontal 5haring

If we look at the table the weight5 u5ed in the devolution formula ,we can 5ee the income di5tance i5 the large5t weight.

Income di5tance i5 calculated by deducting the g5dp of the5tate with the highe5t g5dp per capita metric

5outh'5 lo55

with 5uch a low weight for improving their fi5cal condition 5tate5 are unlikely to take an effort to cutheir fi5cal deficit or improve tax collection5.Data from 5tate budget5 5how that 5ome 5tate5 are 5howing a larger 5hare from the divi5ible pool.Bihar 5hare contribute5 to 67.4 percent 5hare of their total 5hare revenue and UP it i5 42 percent 5hare of their total tax revenue.

On the other end haryana get5 only 13 percent of the total tax revenue.The 5outhern 5tate5 get le55 than 30 percent from their 5hare a5 per the devolution

Mini5try of finance relea5ed the data betwen FY 2019 and FY 2023 where it 5howed that Bihar and UP were getting 7.26 and 2.49 Rupee5 for every rupee they contributed to the Central coffer5. Wherea5 Mahara5htra, Haryana and Karnataka received 8 pai5e,14 pai5eand 17 pai5e re5pectively.

5ome economi5t5 believe that the weight5 a55igned to population i5 fair a5 5tate5 with more population will hvae more demand for ba5ic demand. There i5 thought that the weight a55igned to demo performance can be incea5ed to incentivi5e better human development performance to around 15 to 20 percent. al5o it i5 being recommended to reduce the weightage given to income di5tance in the future

**Hindu Bu5ine55 line article - By Loke5hwari 5K and Parvathi Benu **