Horizontal Devolution of States in India-Suggestions Before the Fourteenth Finance Commission

The focus of the paper is to suggest an alternate methodology for horizontal devolution from divisible pool of Central taxes and disbursement of grants. Tax devolution criteria suggested are population and gap of per capita own tax revenue of a State from the average of highest three States worked on a normative basis. Methodology for normatively estimating expenditure requirements of States are also attempted in this paper. It is suggested that for grant disbursement, the Finance Commissions need to become the prime agency.