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The 15th Finance Commission (2020-25) used which NEW criterion in horizontal devolution to reward States for population control efforts?
- Forest cover
- Demographic performance
- Tax effort
- Area
Answer: Demographic performance
15th Finance Commission horizontal distribution: (a) Demographic performance criterion (12.5% weight): Rewards States that have controlled population growth, measured by total fertility rate, (b) Rationale: 1971 census-based population criterion (15% weight) rewarded States controlling population; 2011 census (15% weight) reflects demographic reality but risks penalizing high-fertility States; demographic performance criterion balances equity with incentives, (c) Full criteria mix: (i) Income distance (45%): Needier States get more, (ii) Population 1971/2011 (30%): Balance historical equity with current reality, (iii) Area (15%): Compensate for geographical challenges, (iv) Forest cover (10%): Reward environmental conservation, (v) Demographic performance (12.5%): Incentivize population control, (vi) Tax effort (2.5%): Reward States improving own tax collection, (d) Applications: (i) Southern States: Benefit from demographic performance criterion due to lower fertility rates, (ii) High-fertility States: Still receive support through income distance, population criteria, (e) Illustrates calibrated fiscal federalism: Technical criteria mediating political claims; balancing equity (needier States) with efficiency (rewarding reforms like population control).