Composition of Finance Commission

Composition of Finance Commission

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The Finance Commission plays a crucial role in shaping India's fiscal landscape by providing recommendations on the allocation of financial resources between the central and state governments. The Commission has also highlighted the importance of sustainable development and recommended the integration of the Sustainable Development Goals (SDGs) into the national development agenda. It has also emphasized the need for aligning fiscal policies with environmental sustainability, promoting renewable energy sources, and addressing climate change concerns. The Finance Commission has also recognized the potential of technology in transforming governance and service delivery.

The Finance Commission is a constitutional body that is appointed every five years. The composition of the Finance Commission includes a chairman and four other members, each with a deep understanding of fiscal matters. The chairman is selected from individuals who have had experience in public affairs, while the other members are typically experts in finance, economics, or related fields. Together, they form a team that thoroughly examines various aspects of fiscal federalism.

The current Finance Commission, known as the 15th Finance Commission, was constituted in 2017 under the chairmanship of N.K. Singh. The Commission's primary task was to analyze the financial position of the central and state governments, assess their expenditure needs, and make recommendations on how to distribute financial resources between them. The Finance Commission has recognized the significance of addressing the issue of center-state fiscal imbalances. It has recommended the establishment of a fiscal council at the national level to provide an independent assessment of fiscal policies, debt sustainability, and the overall state of the economy.

There were multiple recommendations of the 15th Finance Commission. One of the key recommendations was related to the share of states in the divisible pool of central taxes. The Commission suggested increasing the states' share from the previous 32% to 42%. This decision aimed to empower the states and provide them with greater financial autonomy to address their specific developmental needs. Additionally, the Commission recommended the adoption of performance-based incentives for states to promote efficiency in public expenditure. It proposed a separate grant for states that achieve specific targets related to indicators such as population control, ease of doing business, and the implementation of certain government schemes. This approach aimed to incentivize states to focus on achieving key development goals, thereby enhancing overall economic growth and social progress.