large-scale migration from Odisha has been a bane for long but it recently proved taxing for the State Government when the Fourteenth Finance Commission’s (FC - XIV) new criteria of ‘Demographic Change’ cuts down marginally State’s share in tax devolution to 4.6 per cent. According to FC - XIV, the inter-se share of tax of a State is determined by five determinants: 1971 Population figures (17.5 per cent weight), Income distance (50 pc), Area (15 pc), Forests (7.5pc) and Demographic change (10 pc). The Thirteenth Finance Commission had taken into account 1971 population figures along with fiscal prudence, fiscal capacity, forests and area only.
Though the Terms of References (ToR) of the 14th Finance Commission asked the commission to take 1971 population figures to decide tax share, it also had recommended FC - XIV to take the demographic shift as per 2011 Census. The FC - XIV in its report has called the use of 1971 population figure as unfair but as the ToR has mandated so it assigned a 17.5 per cent weightage. However, given the ToR mandate to consider demographic change between 1971 and 2011, the commission gave 10 per cent weightage. This, it observed, as Maharashtra and Delhi have asked for more grants to deal with heavy influx of migrants there.
According to the 2001 Census, Odisha had recorded out-migration to other States to the tune of 4.41 lakh compared to in-migration to State at over 2.29 lakh. The Census had put the net migration from Odisha at over 2.07 lakh. Though the 2011 migration data is yet to be released officially, sources put net migration figure from the State at around 3.03 lakh.
Experts at the Nabakrushna Choudhry Institute of Development Studies (NCIDS) described the changed nuance of the Finance Commission as that rewards fiscal prudence but also penalise States with low prudence in human resources. States, hence, have to be fiscally prudent and simultaneously be prudent enough to employ the vast unemployed populace to earn more inter-se tax share, they explained. The 14th Finance Commission has praised Odisha for adhering to the 13th FC target of keeping the fiscal deficit below 3 per cent of Gross State Domestic Product (GSDP) and revenue surplus by 2014-15.
Simultaneously, it categorised Odisha as low-income State and observed it has large infrastructure deficit. Its inability to use the fiscal space available points, in part, to capacity constraint and Odisha should ease the constraints, utilise the fiscal space available to achieve equitable growth, opined a FC note.
Explaining the underlying import, a senior economist at the NCIDS observed that equitable growth would be possible when the State invests productively. He added equitable growth is measured by three indicators: per capita capital expenditure, per capita debt and per capita GSDP. In 2015-16, the proposed per capita actual capital expenditure is pegged at Rs 3, 821; whereas per capita debt is higher at Rs 14,160. Moreover, the per capita GSDP at current prices in 2013-14 and 2014-15 was Rs 68, 245 and Rs 77, 702 respectively. He explained to measure tangible gain to each person out of economic growth in 2014-15, the difference between the respective per capita GSDP in proportion to total population matters most, which is mere Rs 2,364.