Duties of the Finance Commission

Finance is essential to the growth of any country. And it is critical for the central and the state governments to work together to improve the country, and finance plays an important role in this. As a result, the finance commission enters the picture because it is the legal entity that evaluates state and central finances and makes recommendations such as tax sharing, among other things. In addition, the finance committee contributes to improving the quality of government expenditure and the promotion of fiscal stability in the country. As a result, in this article, you will learn about the definition of the finance commission, the functional areas of the Finance Commission, the list of finance commissions, and so on. 

What is the finance commission of India? 

The Finance Commission is a legally required agency at the heart of fiscal federalism. Under Article 280 of the Founding document, it was established with the primary responsibility of evaluating the Union and State Governments’ finances, recommending the sharing of taxes between them, and laying down the principles deciding the allocation of these taxes among States.

Its recommendations also aim to improve the quality of government spending and promote fiscal stability. The First Finance Commission was created in 1951; there have been fifteen since then. Each of them has confronted its own set of difficulties.

Functions of the finance commission

The functions of the Finance Commission are as follows: 

• The Commission contains suggestions to the President of India on how tax proceeds should be divided between the Union and the states and the proportion of each state’s share.

• The Commission also establishes the principles governing the payout of grants-in-aid from the Public Treasury to states.
• To establish a sound financial system, the President of India may also relate any other issue to the Finance Committee.

Now, let’s discuss the reports released by the Finance Commission of India. 

Finance commission report 

According to Article 281 of the Constitution, the President of India is expected to induce the Finance Commission report and an explanatory note to be laid before each House of Parliament and the government’s action on the Commission’s recommendations.

Let’s discuss some of the finance commission reports discussed in India so far:

The 12th finance commission report

In November 2002, the President of India appointed the 12th Finance Commission, which was chaired by former RBI governor and recognised economics professor Dr C Rangarajan. The Commission issued its suggestion in November 2004, recommending that the states’ share of the consolidated fund of central taxes be maintained at 30.5 per cent. Its recommendations were valid from April 2005 to March 2010.

The 13th finance commission report

On November 13, 2007, the President of India appointed the 13th Finance Commission, chaired by Dr Vijay Kelkar. It recommended increasing the states’ share of the consolidated fund of central taxes to 32%, a 1.5 per cent increase over the previous Commission’s recommendation. It covered the period from April 2010 to March 2015.

The  14th finance commission report

On January 2, 2013, the President of India appointed the 14th Finance Commission, chaired by the governor of RBI, Dr YV Reddy. In December 2014, the Commission submitted a report. The Commission increased its share of states in the consolidated fund from 32% – to 42%, which the central government accepted. Recommendations are valid for five years, from April 2015 to March 2020.

The 15th finance commission report

In November 2017, the Indian President appointed the 15th Finance Commission, which was chaired by NK Singh, a former leader of the Planning Committee. This Commission’s report is expected to be submitted by October 2019. Its recommendations will be valid for five years, from April 2020 to March 2025.

Finance Commission list

There are several finance Commission reports stated in India to date. Let’s check out the Finance Commission list of India. 

The first Finance Commission in India was established in 1951, followed by the second and third in 1956 and 1960, respectively. The fourth was established in 1964, and the fifth in 1968. Later, in 1972, the sixth finance commission was established, followed by the seventh, eighth, and ninth finance commissions in 1977, 1983, and 1987, respectively. Later in 1992, 1998, 2002, 2007, 2013, and 2017, it was the tenth, eleventh, twelfth, thirteenth, fourteenth, and fifteenth.

Conclusion 

A finance commission was formed to manage finances between the federal and state governments and to put an end to the conflict between them. It is critical to the development of our country because both governments use funds. The primary responsibility of the finance commission is to assess the Union and State Governments’ finances, suggesting tax sharing between them, and establishing the principles governing tax allocation among states. This improves the efficiency with which our government spends its money.