Falling fertility rates in southern states point to ageing population in future, says Arvind Panagariya

Southern states, where fertility rates have fallen well below replacement levels, face problematic increases in dependency ratios and ageing populations in the longer run, said Sixteenth Finance Commission Chairman Arvind Panagariya on Wednesday (April 16). The Commission embarked on a four-day tour of Andhra Pradesh from April 15 to 18 and held wide-ranging deliberations with the TDP-led NDA government today at the Secretariat. Andhra Pradesh Chief Minister N Chandrababu Naidu, seeking funds for the state, gave a detailed presentation to the Commission.

Panagariya, addressing a press conference, noted that Naidu argued there is a need to look beyond the yardstick of rewarding states for bringing down total fertility rate to replacement level. "Southern states in particular, where fertility rates have fallen well below replacement levels, face problematic increases in dependency ratios and ageing populations in the longer run," he said. He observed that Andhra Pradesh has recommended increasing the weight from 12.



5% to 20% (on demographic performance), while taking a more holistic approach, which recognises that states may need encouragement for population increase beyond a certain point rather than further reduction. According to the Finance Commission Chairman, Assam and Tamil Nadu also echoed similar concerns. Panagariya said Andhra Pradesh asked for increasing the share of vertical devolution of federal taxes to states from 41% to 50%.

Likewise, Panagariya noted that the Naidu-led state suggested reducing the weightage given to population from 15% to 5% in the Commission’s recommendations over the divisible pool of taxes between the Centre and the states. "Regarding horizontal devolution criteria, the state has suggested reducing the weight given to the population from 15% to 5%," said Panagariya. Likewise, he said the southern state requested slashing the weightage accorded to land area from 15% to 5% and modifying the forest and ecology criteria by decreasing the weightage given to forest cover from 10% to 5%, while calling for a 15% weightage for an increase in forest cover.

He further said Andhra Pradesh suggested reducing the weight given to income distance from 45% to 30% and introducing a 20% weight for the contribution of agriculture and allied sectors to Gross State Value Added. He confirmed that the Commission would "consider" Andhra Pradesh's post-bifurcation challenges. According to Panagariya, the Chief Minister talked at length about Andhra Pradesh inheriting fewer resources and more people, along with lower GSDP and higher population.

"All that had an impact on the long-run finances of the state. It also had an impact on the debt that the state inherited," he said. Moreover, he said the Commission has not made its decisions yet, as such a milestone cannot be reached until it visits all the states.

Consultations with Central government ministries are ongoing, and the Commission is still awaiting a memorandum from the Finance Ministry, he said. Further, he said the Central Government did not mandate any pre-conditions to the Finance Commission for the first time. Unlike previous commissions, such as the 15th Finance Commission, which was directed to use 2011 population data instead of 1971, the current Commission has been given complete independence in formulating its recommendations, he said.

The Finance Commission is expected to submit its recommendations after completing its nationwide consultations and deliberations with all stakeholders..