Centre-State Transfer of Resources

The strategy of freezing the population factor to 1971 levels in deciding Finance Commission awards has been successful in denying states with higher rates of growth of population the benefit of a larger proportion of resources. The penalised states, however, include most of the least developed regions of India. Moreover, this policy dilutes the importance of the population as an indicator of the needs of a state; it also lacks an explicit mechanism to encourage states to curb high rates of growth of population.