Inter-state disparity: Challenges for Finance Commission-I
The main aim behind horizontal devolution is to equalize the provisions for public goods and services in states. Finance Commission of India aims to fill the vertical fiscal gap (i.e. matching the revenue and expenditure of different government level, to achieve the horizontal equity (by allocating the higher share to poorest states), to equalize the fiscal capacities of state i.e. rervenue equalization, to equalize expenditure by providing the cost differentials for public services and to create the incentive for states to mobilize own revenue and spend it efficiently. Criteria and Weights in Previous Finance Commissions Criteria and Weights in provided by XVth Finance Commissions The recent finance commission includes the criteria called demographic performance as 2011 population data is used instead of 1971. Therefore the states who successfully reduced the population raised the concern and therefore criteria for demographic performance (criterion for total fertilit...