ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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A Comment on the Distribution Formula of the 13th Finance Commission

Out of the four different criteria used by the Thirteenth Finance Commission for inter se devolution of taxes, the criteria of fiscal capacity and fiscal discipline, which are given a weightage of about two-thirds in the formula, are inadequate, inconsistent and subjective. The allocation outcome based on such a formula, along with the discretionary nature of grants neither reflects equalisation nor efficiency and hence provides confusing signals to states for their future fiscal behaviour and growth orientation.

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