Use of Dated Population Figures in Centre-State Transfers: Recommendations of Thirteenth and Fourteenth Finance Commissions

Abstract

Finance Commissions (FCs), since eight FCs, have been using 1971 population figures of states, instead of current ones, in the dispensation of central funds to support the cause of population control. This policy has been regressive and is at odd with the core objective of FC transfers as crucial resources are withheld mainly from least developed Empowered Action Group (EAG) states. Contemporary demographic realities warrant reforms on this front. This paper re-estimates the inter se shares of states for the Thirteenth and Fourteenth FC award periods to find the impact of dated population figures on such transfers. The presidential order for fourteenth FC, unlike previous ones, permitted a change in this policy. Fourteenth FC introduced current population figures only as a part of population as an independent factor along with old figures. It is a symbolic move heralding a departure from the status quo sans any major impact.