Understanding Finance Commission of India

Every country’s sustenance is determined by various dynamics viz the defence, the social conditions, the financial state, etc. The major driving factor in ensuring sustainability and stability is the Finance Commission acting in the nation. The Finance Commission of India is constituted under Article 280 and Article 281 of the Indian Constitution. The Finance Commission chairman is qualified in public affairs with experience with various economists and scholars supporting and advising members for the commission. It is a constitutional body whose powers resemble the court of law or judge. The President of India forms the commission.

History of Finance Commission:

There have been 15 Finance Commissions in Indian history since its independence in 1947. The following is the list of Finance Commissions with their chairman and respective years. 

1. K.C. Neogy headed the 1st Finance Commission from 1952 to 1957.
2. The 2nd Finance Commission was under the chairmanship of K. Santhanam and operated from 1957 to 1962.
3. The 3rd Finance Commission was under the chairmanship of A.K. Chanda operated from 1962 to 1966.
4. The 4th Finance Commission was under the chairmanship of P.V. Rajamannar operated from 1966 to 1969.
5. The 5th Finance Commission was under the chairmanship of Mahaveer Tyagi and operated from 1969 to 1974.
6. The 6th Finance Commission was under the chairmanship of K. Brahmananda Reddy and operated from 1974 to 1979.
7. The 7th Finance Commission was under the chairmanship of J.M. Shelat operated from 1979 to 1984.
8. The 8th Finance Commission was under the chairmanship of Y.B. Chavan operated from 1984 to 1989.
9. The 9th Finance Commission was under the chairmanship of N.K.P. Salve operated from 1989 to 1995.
10. The 10th Finance Commission was under the chairmanship of K.C. Pant operated from 1995 to 2000.
11. The 11th Finance Commission was under the chairmanship of A.M. Khusro operated from 2000 to 2005.
12. The 12th Finance Commission was under the chairmanship of C. Rangarajan and operated from 2005 to 2010.
13. The 13th Finance Commission was under the chairmanship of Dr. Vijay L. Kelkar and operated from 2010 to 2015.
14. The 14th Finance Commission was under the chairmanship of Dr. Y. V Reddy and operated from 2015 to 2020.
15. The 15th Finance Commission was under the chairmanship of N. K. Singh and operated from 2020 to 2026.

Composition of Finance Commission:

• The President Of India appoints the Finance Commission, with a chairperson and four other members. 
• They are appointed through an order issued by the President, which specifies their term of office. It is also mentioned that they can be reappointed if necessary.
• The Constitution specifies how candidates are to be selected and enables the Parliament to discern the required qualifications of the members for the commission.
• The commission requires the chairman’s qualifications to have public affairs experience. The other four affairs should have the following qualifications:

1. A person who is a High Court judge or can be elected. 
2. A person with relevant knowledge of economy-related terms like government finance.
3. A person with deep experience in matters of administration and finance.
4. A person specifically qualified in economics.

Functions of Finance Commission:

The main function of the Finance Commission is to make beneficial proposals to the President on multiple matters. The following points entail these functions:

• The commission strongly suggests that tax revenue be given to the states and the centre.
• The commission’s two major functions are redressing the vertical imbalances between taxation abilities and expense responsibilities of the centre and the states.
• It also works toward maintaining equilibrium between states of public services. 
• The functions also include any other topic pointed by the President in the interests of India’s fiscal state. 
• All these recommendations are implemented through the order of the President and other executive orders. 
• It also governs the principles of grants-in-aid to the states by the centre from the Consolidated Fund of India. 

Advisory Role of Finance Commission:

• The recommendations of the Finance Commission are not necessary for the government to follow; it is only advisory. The discretion to follow the recommendations is up to the Parliament. 
• A former chairman of the commission quoted that the suggestions from the Finance Commission should not be ignored unless they are compelling reasons to do so. 
• According to the Constitution of India, it is regarded as the balancing wheel of fiscal federalism in India.

Conclusion:

The Finance Commission is highly substantial for any economy or country to function properly and smoothly. The commission members should be appointed with huge scrutiny, and emphasis should be laid upon its work. The commission’s recommendations should be assessed while formulating any law or provision in the fiscal sector, as it would prove fruitful for the economy. It also forms the backbone of any economy’s budget and other finance-related decisions.