Rameshwar's IAS

14th and 15th Finance Commission of India

Tags: Gig Economy Economy WTO WTO Public Stockholding MSP Economic Growth Masala Bond Environmental Performance Index Forecast of Economic Growth Functions of the Finance Commission

The fifteenth Finance Commission was formed in November 2017 and its purpose is to provide recommendations on the decentralisation of taxes and other financial aspects for five years. The principal tasks of this body include making improvements in the quality of public spending, helping in protecting fiscal stability and means to strengthen cooperative federalism. The Terms of Reference (ToR) of the commission has provisions for rewarding those states that are successful in reducing or eliminating expenditure of populist schemes. Thus, as per its Chairman, the commission has to re-appraise the formula of revenue devolution from the total taxes obtained by the union.

The current Finance Commission was constituted by the Government of India through approval from the President of India in the form of a notification published in The Gazette of India on 27 November 2017. The Chairman of the Commission was Mr. Nand Kishore Singh and it also had two full-time and two part-time members. In July 2019, the term of the commission was extended by a month till November 2019 while the ToR was also expanded by the Union Cabinet. The cabinet asked the body to consider whether, “secure, adequate and non-lapsable” funds could be arranged to fund internal security and defence and how could such a distinct system be operationalised.

The Chairman of the Finance Commission has maintained that one of the challenges of the body was to determine a balance between efficiency and equity. He has also maintained that the constitutionally approved third tier of the Indian government which consists of rural and urban local bodies needs further empowerment so that they can stimulate enhanced economic growth. For better clarity and advise on matters on ToR, the commission has set up an advisory council consisting of six eminent personalities.

However, there can be curious queries on earlier Finance Commissions and therefore, while comparing the 14th finance commission vs 15th finance commission, it can be seen that the earlier one allocated 30 percent to the municipalities and 4.31 percent of its divisible pool towards the local government. On the other hand, the 15the commission gave 4.15 percent of its divisible pool to the local government. There are also significant differences in efforts to streamline metropolitan governance and the design of a national base for municipal finance and they are starkly different.

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