India’s deficient federal redistribution debate

The fifteenth round of India’s five-yearly review of federal resource redistribution has triggered a political controversy. The Fifteenth Finance Commission is expected to base its recommendations on 2011 population data instead of the standard 1971 baseline. 

In principle, this shift is unobjectionable because resources should be allocated according to the present administrative needs of India’s states. On the other hand, the change in the population baseline from 1971 to 2011 is seen to favour the more populous but economically stagnant northern states.

The controversy surrounding the proposed shift in the population baseline has diverted attention away from other new criteria for redistribution such as ‘efforts and progress made in moving towards replacement rate of population growth’ and ‘progress made in promoting ease of doing business’. While the use of the 2011 population baseline will reduce the resource share of some of the less populous but economically vibrant southern states, they will also gain because of other criteria that reward good governance.

A few of the economically vibrant western and economically stagnant eastern states are also likely to lose because of the revised population criterion. The northeastern states that are largely dependent on federal financial support face even greater uncertainty. Yet all of these states are ignored in the bipolar north-versus-south debate.

Three factors explain the selective focus on the population criterion. First, a potential loss in a state’s share of federal resources due to changes in population shares is easy to communicate. Voters cannot be as easily mobilised on the basis of a potential loss or gain resulting from the suggested abolition of revenue deficit grants or new incentives linked to the reduction of the losses in the power sector, for example.

Second, it is the BJP-led union government that has proposed the shift from the 1971 to the 2011 population baseline. The ruling parties in southern states have used this issue to portray the Bharatiya Janata Party (BJP), which happens to be in the opposition in all the southern states, as a pro-north party.

Then there is an implicit concern that if the Fifteenth Finance Commission drops the 1971 baseline for interstate resource redistribution, there will be greater pressure to do the same for interstate delimitation of parliamentary seats.

Inter-state differences over delimitation can be traced back to the 1960s when food shortages made population control a desirable national goal for India. States, however, feared losing parliamentary seats and federal resources if they were more successful than other states in meeting population control targets. So to assure the states, the parliament fixed the 1971 census as the baseline for delimitation of constituencies and federal resource redistribution. It also suspended delimitation for 25 years.

The first post-1970s delimitation was completed in 2008. It used the 2001 census for distributing seats within states, while retaining the interstate distribution based on the 1971 census. The Fourteenth Finance Commission (2013–14) made a partial departure from the 1971 baseline by using a combination of 1971 and 2011 population data. Now, the Fifteenth Finance Commission (2017–19) is expected to drop the 1971 baseline altogether.

While the population criterion features prominently in the debate over redistribution, potential discrepancies in the population data have not received sufficient attention. A careful analysis of demographic data is needed to situate the concerns of states in the proper context.

Since 1941, the census reference date has been 1 March — except for in 1971, when it was changed to 1 April because of mid-term parliamentary elections. So, population estimates from the 1971 and 2011 censuses are not directly comparable unless they are corrected for seasonal migration.

The Indian census follows an extended de facto (synchronous) method of enumeration. People are enumerated on the basis of where they are during the census, rather than where they typically live. Economic migration from more populous states has consequently cushioned the falling population shares of economically vibrant southern (and western) states, where fertility levels have fallen at a faster rate.

Given the growth in interstate migration, the potential for double-counting long-term and seasonal migrants, both in the state where they work and in the state of their origin, and undercounting ethnically different immigrants in economically vibrant states need attention.

Double-counting affects both intra-state rural–urban and interstate population shares. Even long-term migrant workers often keep a foot in their native villages to protect their share of agricultural land, which provides food security and unemployment insurance during times of economic crisis. The native villages also want to retain migrants in their population count to inflate electoral rolls and secure greater population-linked development funding. Poorly trained census enumerators compound the problem of double-counting.

The population shares of western and southern states, as well as urban areas within each state, are likely to increase if double-counting of migrants and undercounting of ethnically different immigrants are corrected for in the census and seasonal migrants are apportioned between jurisdictions. Government sources of information on migration do not provide adequate data required for these corrections though.

Given the anxiety surrounding population shares, it is surprising that there is hardly any discussion of the quality of census data or the delays in the publication of disaggregated data on migration based on the 2011 census. 

Moreover, the exclusive focus on population has meant that there is not much debate on the choice and design of the new performance-based criteria or on the quality of data needed to implement the new incentives. India needs an informed debate on data quality in the context of federal resource redistribution that is not restricted to the proposed shift of the population baseline.

.(Vikas Kumar teaches economics at Azim Premji University, Bengaluru).
Courtesy:www.eastasiaforum.org