The Finance Commission plans to start using the 2011 census instead of the 1971 census for its decision-making: Here’s why it matters

• The body plans to use population data from the 2011 Census to allocate funds to states. So the higher a state’s population, the more funding it gets.
• This reverses a decades-long practice of using data from the 1971 Census. In 1976, the government started actively encouraging states to curb their population growth.
• The move hurts South Indian states since their population growth rates have been lower than the rest of the country.

The 15th Finance Commission said late last year, in its terms of reference, that it would use data from the 2011 Census on population to determine the allocation of resources to India’s states. This means that the higher a state’s population as per the estimates in 2011, the higher the amount of funds it will get from the central government to support its spending requirements.

In effect, the Finance Commission, which is constituted every five years to distribute funds from the central government to states, is reversing a decades-long practice of using data from the 1971 Census for the distribution of funds, at the behest of the Centre.

As a result of the proposal, less populous states in India stand to lose a significant portion of their funding from the Exchequer, for the sole fact that they have been effective at family planning. North Indian states like Uttar Pradesh and Bihar whose populations have expanded rapidly since 1971 will get disproportionately larger share of funds under the proposal.

This has not gone down well with states in South India, which have some of the lowest population growth rates in the country.

According to the 2011 Census, Uttar Pradesh, Haryana, Bihar, Rajasthan all grew at rates that were well in excess of 25% between 1991 and 2001, compared to Andhra Pradesh, Tamil Nadu and Kerala - all of which had a growth rate of less than 15%. Between 2001 and 2011, the discrepancy in the growth rates between Southern and Northern states was similar.

Furthermore, based on data from 2008, the total fertility rates (average number of children born to a woman) of four Southern states – Andhra Pradesh, Karnataka, Kerala and Tamil Nadu – have consistently been less than two, which is lower than the rest the country. Even in the 1970s, the fertility rate of these states was significantly lower than the national average of 5.2.

Earlier this week, the finance ministers of Kerala, Karnataka, Puducherry and Andhra Pradesh, all of which are non-BJP states, gathered in Thiruvananthapuram to declare their disapproval of the commission’s terms of reference and accuse the Centre of being biased against the South.

“This is a threat to the federal system,” Thomas Isaac, the finance minister of Kerala, told media outlets.

Arun Jaitley, the country’s finance minister, has sought to downplay the issue, calling it a “needless controversy”. Without giving any details, he said that the Finance Commission would recognise states that had scored well on population control and that other factors like income levels would also determine the allocation of funds.

In citing income levels as a key consideration, Jaitley has likely reinforced these ministers’ fears that the development of India’s Northern states will come at the expense of their states. All six of India’s least developed states, according to the World Bank - Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan and Uttar Pradesh - are in North India.

The Finance Commission’s use of data from the 2011 Census is not unprecedented. In 2013, the 14th Finance Commission allocated a 10% weightage to 2011 population data when determining fund allocation. Tamil Nadu was the biggest casualty of the move, as it was to have estimated to have lost ₹60 billion in funding.

The 15th Finance Commission proposes to do away with the 1971 Census altogether in making recommendations.

But why did its predecessors use census data from 44 years ago in the first place?

The 42nd Amendment

In accordance with the Constitution, data from the most recent census is used to determine the number of seats a state has in the Lok Sabha, the number of seats in a state legislative assembly and even the value that each vote by a state’s representative bears in the Presidential election. Hence, the higher the population of the state, the greater number of seats and the greater the value of votes. This gave state governments the incentive to let their population growth go unchecked.

During the Emergency in 1976, the Congress administration imposed the 42nd amendment, which said that no changes were to be made to the total number of seats until the figures from the first census after the year 2000 were released. This was meant to encourage states to stabilise their populations without having to worry about their seats in the Lok Sabha decreasing. It made political sense to freeze allocation ratios. Hence, the 1971 Census, which was the most recent census at the time, became the default census that dictated the relationship of each state to the Centre.

In 2001, the BJP-led government extended the use of the 1971 Census to 2026 in order to protect states that had effectively reduced their population growth rates. As a result, the first census after 2026, which will likely be in 2031, will finally lead to the alteration of seats in the Lok Sabha and state legislative assemblies and a change in the value of votes for the Presidential election. One hopes that the deadline won’t be postponed again.

India’s population was 548 million according to the 1971 Census. It currently stands at 1.35 billion. It is rather disconcerting that the government has been using such antiquated population data to determine how many funds each state government should get and how much influence each state should have in the running of the country. However, at the same time, it seems unfair to deprive South Indian states of a significant amount of their funding just because they have been effective in achieving development outcomes and population control.

No sign of a mutually acceptable solution

The representatives of South Indian states are set to meet again in the port city of Visakhapatnam next month. Northern states that aren’t aligned to the BJP like Punjab and West Bengal as well as other South Indian states like Tamil Nadu and Telangana will be invited to the conclave. With enough support, they could pressure the central government into reframing the Finance Commission’s terms of reference. Ironically, in absence of a better option, the way forward for them would mean a regression to 1971. This would make sure that their success isn’t used against them.

However, if the 15th Finance Commission continues to allocate more weightage to data from 1971 instead of 2011, it doesn’t seem far-fetched to predict a backlash from Northern Indian states, who can just as easily say that they aren’t being adequately supported given how much their populations have expanded in the last five decades.

Unfortunately, like most issues in Indian politics, there doesn’t seem to be a solution that can make everyone happy.