Finance Commission Transfers in India: A Critical Note

Sudha Subrahmanyam
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Sudha Subrahmanyam: Indian Economic Service, Government of India

Indian Economic Review, 1988, vol. 23, issue 1, 121-138

Abstract: Part of the transfer of resources from the higher (central) to the lower (state) level of government takes place in India through the Finance Commission, on the basis of a formula for devolution of resources. This paper seeks to highlight the alternative formulae available to the Commission, and to suggest a basis for choosing an appropriate formula from the available set. The first section outlines the alternative principles on the basis of which the transfer of resources could occur. The field of choice open is indicated, and implications spelt out. In the second section, we examine the formulae chosen by some past Finance Commissions, and evaluate the efficiency of the choices made.

Date: 1988
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