Trend in Tax Devolution

In his article on "Deficit Fundamentalism vs Fiscal Federalism: Implications of 13th Finance Commission's Recommendations" (EPW, 27 November 2010), Pinaki Chakraborty discusses, in part, the horizontal distribution of tax transfers from the centre to the states in the recommendations of the Thirteenth Finance Commission (THFC). Regarding the high income states, what is more, data tabulated by C Rangarajan and D K Srivastava in their Federalism and Fiscal Transfers in India (New Delhi: Oxford University Press, 2011, p 232) document the secular decline in tax transfers to this group from the Third Finance Commission onwards, with the successive percentages up to the Ninth Commission being 22.75, 21.96, 19.68, 19.30, 17.71, and 14.22. The middle and high-income states have benefited, too as Govinda Rao forcefully demonstrates in his "Reform of Intergovernmental Fiscal Arrangements for Balanced Regional Development in a Globalising Environment" (in M Govinda Rao and Anwar Shah (ed.), States' Fiscal Management and Regional Equity: An Overview (New Delhi: Oxford University Press, 2009), pp 143-70) from the higher plan investments, location of central public enterprises, concentration of public sector bank branches, higher credit-deposit ratios, and the consequent higher economic growth.