Voters, on both a national and state level, have become more demanding. Single-state parties such as Naidu's TDP aggressively articulate the demands of their state and chief ministers are willing to fight for every rupee. Naidu believes that New Delhi's financial largesse for poor states rewards economic laggards for avoiding often painful reforms. Naidu, for example, faces hunger strikers and rioting protesters opposed to his government's attempts to hike power tariffs. For now, the spotlight is on a report by the Finance Commission, which decides on the distribution of central taxes and grants to India's 26 states.
States collect less important levies such as sales tax and motor-vehicle tax.
The wealth of a state is determined by a formula that includes per-capita income, population, land area, level of infrastructure development, tax effort and fiscal responsibility, with income by far the most important factor. This means that states with low economic growth and high population growth will continue getting a larger slice of the pie, while the fastest-growing states see their share shrink. The Financial Commission justifies the changes by pointing out that poorer states need a helping hand. Poor states tend to have spotty tax collection and a hard time attracting investment. Participants in the negotiations suggest that New Delhi will buy peace with rich states by setting up a special fund for the development of infrastructure.