Examine the economic rationale and criteria adopted by recent Finance Commissions for horizontal tax devolution among Indian states. Which parameter generally carries the highest assigned weight in distribution formulas?

💡 Solution & Explanation

Finance Commissions assign the highest weight to income distance in horizontal devolution formulas to ensure greater fiscal equity and support lower-income states. Alternative parameters like area, population, and forest cover are also included but with lower individual percentage weights. This criterion operationalizes redistributive justice across fiscally diverse states.