Role of Finance Commission and its changing Nature. Finance Commission.

Role of Finance Commission and its changing Nature

• The 15^th Finance Commission (15^th FC) has been constituted under N.K Singh of the Indian costitution.
•  The Finance Commission was established by the President of India in 1951 under Article 280  of the Indian Constitution
• They recommended the distribution of tax revenues between the centre and states, and the allocation of the proceeds among states.
• As per the constitution, the Commission is appointed every five years and consists of a    chairman and four other members.

⏩It is a Quasi-judicial body.

⏩Re-appointment possible-YES

⏩Qualification mention in Constitution-NO

⏩Qualification mentioned under Finance Commission Act 1951

⏩Chairman- Experience in Public affairs

⏩The 15^th Finance Commission was constituted for giving recommendations for the period of2020-25.

Concern with 15^th FC’s Terms of Reference:

Demographic difference:        

          Using 2011 census basis for resources allocation between states would disadvantage states that performed batter in controlling their population over the decades. 

Policy domain:

            The 15^thFC is asked to consider proposing performance based incentives. States see this as an attempt to micro manage their fiscal domain because states have set their own agenda for development. 

Fiscal space:

           The 14^th FC recommended an increase in devolution to states from 32% to 42%. Thus , there is  evidently no squeeze of the fiscal’s space available to the union gov. 

Approach: 

            The FC should not take a “ Residual approach” of distributing what is left over after providing for centre’s requirement