Finance Commission holds second consultation

Why in the news ?
  • 15th Finance Commission held its second consultation with the leading economists in Pune on 21st August 2018. 
Issues discussed
  • Intra state inequalities across the country needs to be considered by the Commission.
  • Flow of funds and resources to Urban Local Bodies and PRIs need to be strengthened.
  • Orderly fashion of Urbanisation needs to be encouraged to facilitate balanced socio-economic development.
  • Fiscal consolidation roadmap needs careful consideration of the amended FRBM Act specially with reference to Debt/GDP ratio and Fiscal Deficit looking at the different conditions prevailing across the states.
  • Contemporary population data would be useful for the purpose of devolution.
  • Commission needs to balance equity with efficiency.
  • The taxation capacity of states and any formula on devolution needed to be formed by equity, justice and uniformity.
  • Centrally Sponsored Schemes need a holistic view to ensure the synergy in resource allocation to various schemes.
Finance Commission
  • The Finance Commission is a constitutional body created by the President of India under Article 280 of the Constitution of India, 1950.
  • Its main purpose is to keep a check on the vertical and horizontal imbalances of the federal finance of India.
  • Vertical imbalances refer to the imbalance between the revenue generated by the Centre and states and their expenditure needs.
  • Horizontal imbalances refer to the failure of states to provide the comparable services due to their incapability to raise the necessary funds.
  • It is usually constituted once in five years.  The first Finance Commission was established in 1951. Till date, 14 Finance Commissions have been created.
    Functions :
  • Distribution of net proceeds of taxes between Center and the States, to be divided as per their respective contributions to the taxes.
  • Determine factors governing Grants-in-Aid to the states and the magnitude of the same.
  • To make recommendations to the president as to the measures needed to augment the Fund of a State to supplement the resources of the panchayats and municipalities in the state on the basis of the recommendations made by the finance commission of the state.
  • Any other matter related to it by the president in the interest of sound finance.

Posted by Jawwad Kazi on 23rd Aug 2018