Using contemporary population data to assign weightages to States would be a ‘realistic’ approach, economists told the Fifteenth Finance Commission on Thursday, adding that there must also be rewards for a population stabilisation policy.
“It makes sense to give weightages based on the most current trends in population but that can’t come at the expense of the States that have done a good job on bringing their populations under control,” one of the economists at the meeting told The Hindu on the condition of anonymity. “So, we discussed this and also how to deal with the uncertainty around GST.”
“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 government said in a release following the meeting, citing the economists’ agreement on the position.
‘Need to balance’
Among the issues discussed were how rewards for past performance of States needed to be balanced with incentives for future performance, the paucity of realistic revenue and employment data, and the challenges being faced in making robust GDP projections and pension liabilities.
“Another issue that came up was how the States are coping with their troubled power distribution companies and how the UDAY bonds will affect States’ interest liabilities and overall finances,” the economist said. Commission members later met the panel’s advisory council and discussed the issues in greater detail, according to an official in the Finance Ministry. “The meeting with the advisory council was more detailed and stressed more on certain issues such as how centrally sponsored schemes are to be better managed, and the state of the political economy across the country,” the official added.
The meetings come against the background of several states protesting against the terms of reference of the Commission, which state that it must base its calculations on the population figures in the 2011 Census. The states argue that this would unfairly benefit more populous states while penalising those that have made efforts to stabilise their population growth rates.
