Hindu Editorial Analysis : 1-October-2024

As India grapples with rising levels of inequality, the role of the Finance Commission becomes increasingly vital. It is essential for the 16th Finance Commission to focus not only on inter-state disparities but also on intra-state disparities. This essay explores the importance of recognizing these internal inequalities and their implications for development and governance.

Understanding the Finance Commission’s Role

The Finance Commission in India is responsible for distributing financial resources between the central government and the states. Its recommendations significantly affect state finances and overall governance. A key challenge the Commission faces is balancing equity (fair distribution) and efficiency (optimal use of resources).

The Reality of Intra-State Disparities

Intra-state disparities refer to the inequalities that exist within individual states. These can manifest in various forms, including:

  • Income Differences: Some regions within a state may have significantly higher incomes than others.
  • Infrastructure Gaps: Access to roads, electricity, and other infrastructure can vary widely.
  • Public Services Access: Availability of healthcare and education can differ dramatically.

A clear example is the difference between a state’s capital city and its surrounding districts. For instance, Bangalore in Karnataka and Mumbai in Maharashtra attract most government resources, leaving peripheral areas neglected. This neglect can lead to a cycle of underdevelopment.

Consequences of Neglect

When certain districts are overlooked, several issues can arise:

  • Resentment: Communities may feel neglected and express grievances, sometimes through violence.
  • Left-Wing Extremism: Areas like Bihar, Jharkhand, and Chhattisgarh experience Maoist insurgency, partly due to feelings of abandonment.

The Finance Commission’s Approach

Historically, the Finance Commission has focused on equalization principles to address inter-state disparities. This method considers how far a state’s income lags behind others but often overlooks intra-state differences. The tension between equity and efficiency complicates this approach, as resource optimization can sometimes overshadow social justice.

Norm-Based Equalization

The concept of equalization aims to provide basic services uniformly across states. However, critics argue that this approach often fails to address specific regional disparities effectively.

Strengthening Local Governance

Local bodies play a crucial role in governance, yet they are often the weakest link in the system. With around 250,000 rural and 5,000 urban local bodies, they are essential for political participation. Despite the establishment of State Finance Commissions, many lack the necessary data to implement effective equalization measures.

Why In News

Given the rising levels of inequality and disparity among the states, it is crucial that the 16th Finance Commission gives intra-state disparities as much importance as inter-state disparities, as addressing these internal inequalities is essential for fostering balanced development and social cohesion across all regions.

MCQs about Addressing Intra-State Disparities: A Call for Action by the 16th Finance Commission

Sure! Here’s the MCQ format you requested:
  1. What is the primary role of the Finance Commission in India?
    A. To regulate the banking sector
    B. To distribute financial resources between the central government and the states
    C. To create educational policies
    D. To oversee state elections
    Correct Answer: B. To distribute financial resources between the central government and the states
    Explanation: The Finance Commission is responsible for recommending how financial resources should be allocated between the central government and various states, impacting state finances and governance.
  2. Which of the following is an example of intra-state disparity?
    A. Differences in income between states
    B. Variations in healthcare access within a state
    C. Tax policies among different states
    D. Population growth rates across the country
    Correct Answer: B. Variations in healthcare access within a state
    Explanation: Intra-state disparities refer to inequalities within a single state, such as differences in access to healthcare services among various districts.
  3. What consequence can arise from neglected districts within a state?
    A. Increased foreign investment
    B. Improved educational outcomes
    C. Social unrest or violence
    D. Enhanced infrastructure development
    Correct Answer: C. Social unrest or violence
    Explanation: When certain districts are overlooked in terms of resources and development, feelings of neglect can lead to resentment, which may manifest as social unrest or violence.
  4. What is a major challenge faced by the Finance Commission regarding resource distribution?
    A. Lack of funding from the central government
    B. Balancing equity and efficiency
    C. Increasing population in rural areas
    D. Changes in international trade policies
    Correct Answer: B. Balancing equity and efficiency
    Explanation: The Finance Commission must navigate the tension between ensuring fair distribution of resources (equity) and optimizing the use of those resources (efficiency), making this a significant challenge in their deliberations.

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