Southern States Dependency on Central Transfers?An Analysis

A portion of revenue receipts of States is from central government in the form of share in taxes and grants based on recommendations of the Central Finance Commission and other channels. The share of total transfers from the centre in the total revenue receipts of the states or revenue expenditures indicates the extent of states dependency on the transfers from the centre. This study examines the dependency of Southern states, viz. , Andhra Pradesh, Karnataka, Kerala and Tamil Nadu, on Central Fiscal Transfers. It particularly focuses on the role of transfers through tax devolution under the recommendation of the Finance Commissions. The analysis of dependency is then extended to total transfers that are given in the form of share in Central taxes, Finance Commission grants, plan grants and other grants. The analysis with respect to southern States covers the period from 1995-96 to 2012-15. The objective of this paper is to examine the changes in the central share as per the recommendations of the successive Finance Commissions as well as the dependency of the States on Central transfers.