Changing Centre-state maths

The 14th Finance Commission has recommended tax devolution of an unprecedented 42 per cent of the divisible pool to states. Though this is significantly higher than the 32 per cent recommended by the previous Commission, M Govinda Rao, member, 14th Finance Commission, told Business Standard it would be misleading to compare the two figures. This, he said, was because the 14th Commission had taken into account the total requirements in the revenue account without making a distinction between Plan and non-Plan, unlike the earlier Commission, which made its recommendations to meet non-Plan revenue expenditure needs of states.

Based on the new recommendation, tax devolution to states works out to Rs 39.48 lakh crore over a five-year period. For 2015-16, tax devolved to states is estimated to be Rs 5.79 lakh crore, up 51.5 per cent from the Rs 3.82 lakh crore in 2014-15.

Total grants to states, including post-devolution revenue deficit grants, disaster relief grants and those to local bodies, are now proposed to be 5.72 per cent of the divisible pool over a five-year period, estimated at Rs 5.37 lakh crore.

The total tax devolution and grants to states, therefore, have now increased to 47.72 per cent of the divisible pool over five years, substantially higher than the recommendations of the previous Commission. A snapshot of the numbers:

Transfers recommended by the 14th Finance Commission (% of divisible pool)