Despite certain states receiving more resources through higher tax devolutions on account of low per capita income and other indicators, they have not managed to catch up with the more developed states, said NK Singh, chairman of the 15th Finance Commission (FC), on Thursday.
Singh questioned the desirability of achieving a convergence in the growth rates of the states. Over the past 30-40 years, previous FCs have used the equalisation and distance formula to award more resources to states with low growth rates, but they have not caught up with the high-growth states, he said.
“The Finance Commission is currently grappling to try and see whether, and on what factors can a convergence be achieved, recognising the significant heterogeneity in growth patterns of different states,” Singh said during an online discussion hosted by the National Council of Applied Economic Research.
The NK Singh-led FC was tasked by the government to draw up a fiscal consolidation roadmap covering the five fiscals from FY2020-21 to FY2025-26. In November last year, the commission submitted its interim report for FY21 and is slated to submit its final report on October 31.
The FC has had a slew of meetings with various ministries and its advisory councils since the pandemic hit the economy, given the changes in the scenario and assumptions for the basis of its recommendations.