Topic: GS2 – Indian polity
In India’s vibrant federal democracy, the relative population size of a state holds immense political and economic significance. The southern states, characterized by strong linguistic identities and regional renaissances, have surged ahead in various developmental spheres. Notably, they have achieved population control through social development and economic growth, setting them apart from their northern counterparts. However, this demographic divide has far-reaching implications for political representation and fiscal transfers in the country.
Delimitation and Political Representation:
The Indian Constitution, under Article 81, mandates that Lok Sabha constituencies should be equal in population size. This principle was initially established based on the 1971 Census and remained unchanged until the first Census after 2026. The population growth rates vary significantly between the non-Hindi-speaking southern states and the Hindi-speaking northern states.
Consequently, if constituencies were to be equalized today based on current population projections, the southern states would lose representation while the northern states would gain seats. This shift would result in an increased political representation for the northern states and a decline for the southern states.
Role of Population in Fiscal Transfers:
Every five years, India’s Union government forms a Finance Commission to recommend the distribution of tax revenue among states. Historically, population and per capita income have been crucial indicators in the distribution formula, with varying weights. Initially, population size played a substantial role in rewarding populous states.
However, over time, the weight assigned to population in the formula diminished, and the 1971 population was used instead of the 1981 figures.
Notably, this practice changed with the Fifteenth Finance Commission, which openly declared using the 2011 population in the distribution formula. Consequently, southern states faced reduced financial transfers from the Union government, as a reward for controlling their population growth.
Furthermore, per capita income, often seen as a proxy for a state’s ability to generate revenue, has been a significant factor in the distribution formula. States with higher per capita income receive a smaller share of Union tax revenue. This element of the formula tends to favor northern states.
The dynamics of population control, political representation, and fiscal transfers in India’s federal democracy reflect the complex interplay between demography and politics. While southern states have made strides in population control through social change and effective policies, they face a reduction in both political representation and financial transfers. Conversely, northern states benefit from these changes, underlining the intricate balancing act that underpins India’s democratic system.
Question: Examine the role of the Finance Commission in shaping fiscal federalism in India. How have recent changes in population-based criteria impacted fiscal transfers, and what challenges do these changes pose to the Indian federal system?