Continuation of Finance Commission allocations and economic disparities among states

Used 2011 population census. Also population measures and tax efforts considered in criteria.

However, some factors led to economic disparities among states:

i) Increasing cess and surcharge reducing the divisible pool of taxes

ii) Income distance given high weightage

(iii) States contributing more such as Tamil Nadu, Maharashtra, Karnataka getting less and Bihar, UP - major receiver.

iii) Dependence on the aid - aid curse - despite receiving funds, no effort to maintain fiscal consolidation and growth.

iv) High revenue expenditure leading to fiscal deficit of states. (S) OPS announced in some states.

Finance commission forms important part of fiscal federalism of the country. States must manage their finances to reduce disparities