The President constituted the 11th National Finance Commission recently to announce a new award for the sharing of the federal tax revenues between the federal and the provincial governments.

This is an appropriate time to make an assessment of the economic developments in each province after 2009-10, when the 7th NFC Award was announced. This award was initially valid for five years. However, it has continued in the absence of a consensus on a new award in the 8th, 9th and 10th NFCs.

One of the fundamental requirements for assessing the income gap and distance among the provinces is the presence of an annual Gross Regional Product (GRP) series of each province by sector and sub-sectors.

However, despite the pressing need for this data base to facilitate provincial planning the Pakistan Bureau of Statistics, along with the Provincial Bureaus, has not yet produced the time series of the GRP of each Province. Such a series has been produced for each State of India over the last many years.

The absence of an official series of the GRP by sector of each province in Pakistan has made it difficult to determine the economic consequences of NFC Awards. Given the fiscal equalization in the horizontal sharing formula, the fundamental question is whether there has been a process of reduction in the extent of inequality among the provinces in per capita incomes. Other key measures are the extent of own-fiscal effort by each provincial government, level of development spending to promote growth and so on, which have to be related to the size of the regional economies.

Fortunately, there have been attempts by economists to make estimates of the GRP of each province and to quantify the........

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