Kerala wants Finance Commission to use 1971 census data for tax devolution

THIRUVANANTHAPURAM: Kerala has put forth its recommendations for the terms of reference (ToR) of the 16th Finance Commission, urging the use of 1971 Census data or the incorporation of incentives for states with low population growth. The upcoming Finance Commission will play a pivotal role in determining the distribution of tax revenues between the central and state governments and the allocation of proceeds among states for a five-year period, commencing on April 1, 2026.

Kerala contends that the ToR should not mandate the use of population data based on the 2011 Census. Instead, it proposes that either a mandate be issued to utilise population figures from the 1971 Census or leave the decision to the Finance Commission, enabling it to consider the interests of all states, particularly those with minimal population growth since 1971. This can be achieved by incorporating appropriate incentive criteria with due weightage.

The 15th Finance Commission faced criticism for its recommendations based on 2011 census data, particularly from states like Kerala, which had effectively controlled their population growth. These states expressed concerns about being penalised for their population control efforts, despite notable achievements in health, literacy, and education.

Kerala also calls for a balanced approach to off-budget operations by both the central and state governments, highlighting the need for consistent treatment in this regard.

Furthermore, the state emphasises the importance of granting greater autonomy to the next Finance Commission. It suggests avoiding the inclusion of overly expansive or restrictive items and numerous conditions in the ToR. “The commission should be able to freely discharge its constitutional mandate after duly considering the views expressed by the States and the Union,” the document said.

Kerala’s recommendations also include the consideration of progress in decentralisation and incentives to promote it, addressing post-COVID fiscal challenges, and providing additional borrowing space for states implementing eco-friendly measures.

Additionally, Kerala advocates for a grant-based approach without conditionalities, rather than mandating specific actions for states concerning redistributive fiscal interventions.