No easy head counts (Population calculations and financial devolution)

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No easy head counts (Population calculations and financial devolution)

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• Population distribution and funds devolution: The concern stems from the way population distribution has changed from 1971 to 2011 across states and how it may impact financial devolution.
• What is overlooked? At the first level, it is not the absolute number that matters, but the composition of population that does (which must have evolved over 40 years) – a demographic transition
• Seven criteria for resources transfer: Income distance, tax effort, index of infrastructure, population, area, fiscal capacity distance, fiscal discipline. Five of these need population for calculation. Hence population equivalence needs to be used rather than raw population figures.
• The divide: There is a clear divide between Indian states that have achieved replacement level of fertility versus those that haven’t. If we take raw population size as parameter, those who have not stabilised their population will win over those who have. (fertility goals were set in national five year plans).
• Use of 2011 is rational: As a lot of migration has happened from 1971 to 2011, it is better to use latest figures. The 2011 census reports 37% population as migrants (based on last place of stay). (a) 51% of Maharashtra population is migrant, while 29% of UP’s is. Any central funds transfer can be adjusted for in-migration and out-migration. (b) So if Bengali migrants move in to Kerala, then Kerala needs funds to support them (state of destination, not state of origin). Raw population data cannot account for such changes.
• Determining equivalence in population size and their share: The levels of dependence and longevity need to be considered. The first is for human capital formation, and second for social protection. Kerala with the lowest population growth rate sees people at 60 years expecting to live another 23. So the elderly need to be looked after for far longer, and more funds are needed (not less, based on population stabilisation).
• Statistical comparison: Kerala and UP have population shares of 2.81% and 18.78% resp. Child population shares are 35.69% and 23.44% resp. Read together, the moderation in gap of population shares becomes 1.57% for Kerala and 9.34% for UP.
• Dependence, longevity, mobility: Since a third of Indian population is now mobile, states have negative and positive net migration. Destination states get active workers, and origin states see space in workforce.
• Demographic Dividend: Bihar, Raj., MP and UP are at their peak in D.D. in both in- and out-migration. UP sends the most to the Gulf region. Earlier it was Kerala and TN, which are now ageing.
• Summary : Fiscal transfers by Finance Commission need to look at population equivalence in the most holistic sense, rather than be swayed by hollow claims based on raw population figures alone.

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