Aspirational India, states & 16th Finance panel

As India has become more aspirational, state governments, cognizant of their prime role in accomplishing the national aspirations, have demanded that the 16th Finance Commission increase their share in the divisible pool of taxes to at least 50% to reduce the congenital inequality between the Union and the states.

- K J JOSEPH

With respect to the horizontal devolution, it is demanded, among others, that the share of each state in the divisible pool shall be in accordance with their contribution to the country's development.

The Finance Commission, having a say in more than 45% of the revenue receipts of the states, cannot afford to ignore such requests. The moot question is how to understand the contribution of a state to India's development. The prevailing perspective, in terms of the state's contribution to the Union's tax revenue, appears to be a narrow accounting approach and inappropriate from a development perspective. What is the way out?

A new perspective The development of India, given its cooperative fiscal federal system, is contingent on the development of key stakeholders and harnessing the linkages therein. The key stakeholders are broadly: 1) The Union government, 2) State governments, and 3) People. Of the three, states are indeed at the centre stage.