FINANCE COMMISSION OF INDIA

 UPSC GS MAINS IMPORTANT QUESTIONS


How is the Finance Commission of India constituted? What do you know about the terms of reference of the recently constituted Finance Commission? Discuss


Article 280 of the constitution of India provides for a Finance commission as a quasi judicial body. Finance Commission is constituted by the President of India every fifth year or at such earlier time as he considers necessary. The Finance Commission consists of a chairman and four other members to be appointed by the president.




The fifteenth Finance Commission was set under the chairmanship of N.K.Singh to suggest measures for the distribution of net proceeds of taxes to be shared between the Centre and the states for the period 2020 to 2025.

Terms of Reference of 15th Finance Commission:

1. Vertical devolution of taxes- The Finance Commission has to examine the impact of 42% devolution (14th Finance Commission) on Union government, including its New India Vision - 2022. States fear that the devolution may be reduced to less than 42%.

2.The 15th FC will use Census 2011 data for horizontal distribution of taxes among states. The south Indian states will reduce fertility rates fear that Northern states with reduce fertility rates fear that the Northern States will get proportionality more funds.

3. 15th FC will examine whether revenue deficit grants given to the states should be abolished. It will also make recommendations on additional conditions to be imposed on states while borrowing from market. States fear it will reduce their autonomy in raising loans from the market.


Asking the Commission to take into account the performances in implementation of various Central Schemes is equally contentious. Cooperative federalism also demands cooperation between the states. The states must come together to get the issue terms of reference addressed which raise the questions of constitutional propriety.

Sustainable Development Goal SDG-10 aims for reducing inequality within and among the countries. An equitable distribution of revenue tied with performance incentives will help greatly in this regard.







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This is Navina . Visit my blog to get crisp content on various stuffs.

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