Demographic performance criterion

Indian Economy glossary

Topic: Fiscal Federalism: Finance Commission, Devolution and Centre-State Finances · NCERT: Beyond NCERT

Meaning

The demographic performance criterion is a devolution criterion, meaning one of the weighted factors that decide each state's share of central taxes. It rewards states that controlled population growth. It exists because Finance Commissions moved from 1971 to 2011 population data, which would otherwise cut the shares of states that brought down their birth rates early. It is an efficiency criterion, because it rewards performance rather than need.

Example

The 15th Finance Commission (2021-26) gave it a 12.5% weight, based on total fertility rate (TFR), the average number of children a woman has. The 16th Finance Commission (2026-31) gave it a 10% weight and redefined it as lower population growth between 1971 and 2011. This helps southern states such as Kerala and Karnataka.

Don't confuse with

  • Population criterion: population gives more weight to states with more people. Demographic performance rewards states that slowed their population growth.

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