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A country necessarily needs a body that takes care of the imbalance which is maintained between the powers of the Centre and the state government. For this case, the Indian government has created a Finance Commission that helps in maintaining the financial connection between the Central and the state governments of the individual states. The Finance Commission is a commission that takes care of the division of revenues between the Centre and the state governments.
What is the Finance Commission?
The Finance Commission is a constitutional body that is considered as an autonomous arbiter of resources. It looks after the division between the union and the states. The core mandate of the commission is to divide the union taxes in a way that enables the union and the states to perform their respective expenditure responsibilities.
The Indian Economy runs based on the recommendations made by the finance commission of India which addresses the financial imbalances that are present in the economy. Article 280 of the Indian Constitution mentions the creation of the finance commission by the President. Currently, Nand Kishor Singh is the chairman of the finance commission of India.
Role of Finance Commission
The Finance Commission mainly focuses on the maintenance of the financial relations between the State government and the Central government.
1)The mandatory role of this commission is to act as an instrument that divides the proceeds from the taxes between the various governments of the country.
(a) vertical devolution: Centre – States
(b) Horizontal devolution: State – State
2) The Finance Commission of India also deduces the principles that govern the grants in aid from the revenues of States, that come out of the consolidated fund of India.
3) The Finance Commission of India assesses the ridrease or surge in the Consolidated Fund of a state to fasten and clasp the resources of the state Panchayats and Municipalities.
4) The commission has all the powers of the Civil Court, which is mentioned in the Code of Civil Procedure, 1908. It can summon any bystander or can inquire for the creation of any public statement or document from any tribunal or office.
5) Any other consequence or matter that is referred to the Commission by the President of India in the interest of sound finance.
Advisory role of the finance commission
It is nowhere enacted in the Constitution that the suggestions of the commission shall be compelling or restraining upon the Government of India. The directions made by the Finance Commission are advisory only and therefore, it is not binding upon the state. It is up to the Regime to carry out its suggestions on bestowing wealth and currency to the states.
15th Finance Commission of India
Below are the important points with regard to the 15th Finance Commission of India:
1)For the Local Government
In the case of, the inter distribution of grants amongst the States, the weightage given is 90% on the population of an area and 10% on area.
Out of the total grants that are earmarked for the three-tier panchayati raj institutions, 60% is set aside for national preferences, while 40% is to be utilized at the intention of the PRIs for enhancing the necessary basic services.
Basic grants are recommended only for cities/towns having a population of people of less than a million.
For Million-Plus cities of India, FC has suggested 100% of the grants for the performance-linked through the MCF (Million-Plus Cities Challenge Fund).
2)Maintenance of Vertical devolution
The 15th Finance Commission has specified that during the maintenance of the vertical revolution in this phase of 2021-26, it would take care of the considerations and needs that have or may arise due to the pandemic of coronavirus. This would help in stabilizing the economy and allow predictability in the country.
3) Defense and Internal security
Composition Of A NON-LAPSABLE MODERNISATION FUND FOR DEFENCE AND INTERNAL SECURITY of the nation.
Purpose of above recommendation
(a) modernisation of defence services
(b) modernisation of state police forces (c) welfare fund for our soldiers and paramilitary personnel who are surviving at the borders of our nation.
- 1,000 CRORE PER ANNUM has been allocated for the interest of households of defence and CAPF faculty who lose their existences in frontline missions.
4) State-specific grants
To withstand special wants and command disabilities of States that could not be enclosed or encircled under the formula-based devolution and the other major sector-specific grants, the 15th Finance Commission has decided to release grants for the states of India.
5) Building Resilience in Health Sector for Pandemic
1)The total grants-in-aid to the health sector has been distributed as Rs. 1, 06,606 crore(about 0.1 per cent of GDP).
2)Health spending to be boosted and enhanced to more than 8 per cent of State’ respective budgets of the states in the country.
3)Introduction of Constitution for the All India Medical and Health Service
4)Restructuring the asymmetric curriculum: Asymmetric distribution existing in the medical colleges needs to be corrected by the government and private investors.
Conclusion
One of the biggest flaws of the 15th Finance Commission of India is that it has given less weightage to the previous years of the reports. Also, in spite of the situations in India in 1971, it has included 1971 in the report as well. But it would be premature, if we jump to conclusions at this moment. Let’s wait and see what financial boost this report can bring for the economy of India.
