The Finance Commission serves as the balancing wheel of fiscal federalism, but despite its efforts to widen the share of states in the divisible pool of taxes, the struggle for financial resources between the center and states has only intensified. Analyse the factors contributing to this paradox and its implications for fiscal federalism in India.

FACTORS CONTRIBUTING IN PARADOX: (1) Less contribution to states in tax. Only 41% of tax collection is devolved to the states as per 15th FC. (2) No contribution to the state in case Almost 20% of entire tax collection consists of cess from which no money is granted to the states. (3) As per 15th FC, for horizontal devolution factor like population are considered for giving due share. This proves to be a penalising factor to the states who have taken measures for population control. (4) Centralising nature of Finance Commission. (5) No participation of state in making the appointment of members of Finance Commission and opaque appointment of FC. (6) Practises are also considered while devaluing funds but it granting freebies might be necessary in some states.

Implications for fiscal federalism: (1) States and Centre in confrontation undermining cooperative federalism. Example: If confrontation in issue of GST Compensation. (2) States performance is low. Example: Huge revenue deficit in various states fuel. (3) Confrontation between the Centre and States regarding finance undermines the overall deper development process. (4) Huge dependence on grants by states and local bodies is against the idea of federalism and decentralisation hurting the autonomy. Finance Commission is said to be the balancing wheel of fiscal federalism. It must take the measures to empower states for achieving cooperative federalism.