Equity and incentives implications for grants in the thirteenth finance commission recommendation

As per the Terms of Reference for the Thirteenth Finance Commission, the commission has been mandated to recommend Grants-in-Aid of States’ revenue account and other grants including measures to supplement the resources of the panchayats and municipalities in different states. This paper focuses on the equity and incentive considerations of FC-XIII in the determination of grants. A comparison of the XIII FC vis-à-vis FC XII has been made to assess the extent the weight age for equity and incentives has been altered and the methodological differences in estimating state wise shares under different criterion in the grants.