Constitutional Provision:
- The Finance Commission (FC) is a constitutional body established under Article 280 of the Indian Constitution.
- It is constituted by the President of India every five years.
Objective:
- To define the financial relations between the central government and the state governments.
- To promote fiscal federalism in India.
Functions:
- Distribution of net proceeds of taxes between the Centre and the States.
- Allocation of grants-in-aid to the States.
- Measures needed to augment the Consolidated Fund of States to supplement the resources of Panchayats and Municipalities.
- 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 appointed by the President.
- The qualifications, manner of selection, and the tenure of members are determined by Parliament.
History:
- The First Finance Commission was constituted in 1951 under the chairmanship of K.C. Neogy.
- As of now, there have been 15 Finance Commissions.
Key Recommendations and Reports:
- The Finance Commission submits its report to the President of India.
- The recommendations made by the Finance Commission are advisory in nature.
15th Finance Commission:
- Constituted on November 27, 2017.
- Chairman: N.K. Singh.
- Term: November 27, 2017 – November 30, 2020.
- Key Recommendations:
- Horizontal and vertical devolution of taxes.
- Principles of fiscal sustainability.
- Performance-based incentives for States in areas like health, education, and social welfare.
Important Facts:
- The Finance Commission ensures a fair distribution of resources between the Centre and the States.
- It plays a crucial role in maintaining a balance in fiscal federalism.
- The recommendations impact the fiscal health and economic policies of both the Centre and the States.
