Finance Commission

Finance Commission

The Finance Commission is a constitutional body in India that is tasked with the distribution of financial resources between the central government and the individual state governments. It is established under Article 280 of the Constitution of India.

History

The concept of the Finance Commission was introduced in 1951, following the adoption of the Indian Constitution. The first Finance Commission was established in 1951 under the chairmanship of K.C. Neogy. Since then, a new Finance Commission is constituted every five years.

Functions

The primary functions of the Finance Commission include:

• Distribution of the net proceeds of taxes between the Union government and the State governments, and allocation between the states of the respective shares of such proceeds.
• Determining the principles that should govern the grants-in-aid of the revenues of the states out of the Consolidated Fund of India.
• Any other matter referred to the Commission by the President in the interests of sound finance.

Composition

The Finance Commission consists of a chairman and four other members, who are appointed by the President of India. The qualifications for the members are specified in the Constitution, and they are chosen for their expertise in public affairs, finance, and economics.

Recent Commissions

The 15th Finance Commission, chaired by N.K. Singh, was constituted in 2017 and submitted its report for the period 2020-2025. It made recommendations on tax devolution, grants-in-aid, and fiscal consolidation.

Impact

The recommendations of the Finance Commission have a significant impact on the fiscal federalism in India. They influence the financial relations between the central and state governments and ensure a fair distribution of resources.

Challenges

Some of the challenges faced by the Finance Commission include:

• Balancing the fiscal needs of the central and state governments.
• Addressing regional disparities in development.
• Ensuring fiscal discipline while promoting growth.

See Also

• Fiscal Federalism in India
• Constitution of India
• Union Budget of India

References

• Government of India. "Finance Commission." Ministry of Finance.
• Singh, N.K. "Report of the 15th Finance Commission." Government of India.