There are many issues that the Sixteenth Finance Commission will have to deal with. In this article, we focus on one issue which has been raised by many States, particularly those in the south of India. The issue (or the complaint) is that these States have been facing a decline in their share out of the resources transferred from the Centre to the States, from Finance Commission to Finance Commission.
In finding a solution to this issue, we need to look at: which States have been gaining and which are losing their share over time; the criteria of horizontal distribution which has led to some States steadily losing their share; and what can be done to reverse this trend.
In Table 1, the shares of groups of States and those for selected States are shown, for the Twelfth Finance Commission to the Fifteenth Finance Commission (final report). In the case of the southern States, there has been a steady fall in their share, from 19.785% to 15.800%. In a comparison of these two Commissions, the northern and eastern States have also lost. The ‘gainer States’ were the hilly, central, and western States including Maharashtra.
