Arvind Subramanian: If this were the First Finance Commission!

How much tax revenues should prosperous states be expected to transfer to the less well-off? The answer to this question is inevitably political.

India is changing: From many fragmented economic Indias to one integrated India; from a more centralised political India to many quasi-sovereign Indias. As a result, its fiscal arrangements, especially on tax sharing, need to evolve. But in what direction? That is the unenviably difficult question facing the Fifteenth Finance Commission (FFC) under the chairmanship of N K Singh.
 
Already, a controversy has arisen. Initial salvos were fired by a number of Southern states. Their concerns were expressed in technicalities, namely the particular criteria the FFC should use, and their precise definitions. But the underlying issue is a serious one: