Objectives of Finance Commission

India is a large country. It has the second-largest population in the world and there are various kinds of development needs which it has. The country gained its independence from the colonial government in 1947, but it took many more years than that for it to come out of the chains of poverty and economic backwardness. 

It has been claimed innumerable times that before the arrival of the British in India, it was the most prosperous and economically sufficient country. But after it became a colony, it was robbed of all its resources and most of its economic prosperity was lost. When the constitution was framed and various ministries and offices were incepted for the targeted growth of the country and its citizens, a finance committee was also formed. 

Although the country could have generated revenue and borrowed loans, managing it was a more complicated task. India is a republic of states where every part needed some kind of specific fund allocation for its growth and any kind of disparity could have created a lot of dispute. To avoid any kind of discrimination, intentional or unintentional, a finance committee was formed for the uniform allocation of monetary funds.

Historical Overview and Structure

When India gained its independence, it suffered from a significant kind of financial crisis, which was a significant cause of dispute among the states and an alarming situation for its development. With the framing of the constitution, Dr B.R Ambedkar framed the finance commission and described the same in article 268 of the Indian constitution. 

The primary factor behind this was the need for a better allocation of funds. The central government couldn’t manage all the financial needs and channel them in the needed direction and it was better to leave the task to the state government. The finance commission ensures the proper distribution of funds as per the needs of various states. The formation of the finance commission recurs every five years and can be dissolved and reformed as per the president’s instructions. 

Although the president is the head and authority for appointing the whole committee, the government takes the actual decisions. When it was formed for the first time, the time span was 2 years, but since the second tenure, it has been formed for 5 years every time.

The structure of finance is straightforward and hassle-free. There is one chairman and four other members, excluding the chairman, who the president appoints as per the eligibility criteria decided by the government. The general criteria which are followed at the time of every appointment are that the person should be either a judge or qualified enough to be one and should have an in-depth knowledge of financial setup. If a person is found to have taken personal financial benefit or committed any criminal offence, they will be disqualified.

Objectives of the Finance Commission

The finance commission has various kinds of responsibilities, and it follows all of them with immense perfection. One of the major causes behind its formation was the allocation of financial resources among various states and the other objectives discussed below.

• The finance commission does its research on the needs of all the states individually and the amount which they will need for the growth and development in the location

• Various taxes are shared between the centre and state, and the finance commission finalises the essential criteria for the division of taxes

• The finance commission is a monetary link between the central government and all the state governments and it maintains the Chinese communications regarding the same

• If there is any kind of financial upgradation required for the country’s overall development, then the finance commission advises the government about the same

Functions of the Finance Commission

The finance commission has various functions as fund allocation is a very diverse part of development in the country. In addition, there are various other functions of the finance commission as discussed below.

• All the taxes which are collected in the country either belong to states or the central government or both in a specific proportion
• The finance commission fulfils the responsibility of dividing and deciding on these matters
• All the funds and grants needed by different states are allocated by the finance commission in India in case of any specific bee or any crisis
• The finance commission of India is also given the power on doing research work regarding the needs and any kind of upgradation in the financial part of the government and advice the same to the president and the government

Conclusion

The finance commission is a crucial portion of government and has a major role in the development of the country. It was formed to create a financial balance in the country and has been doing the same since its formation. There are various other responsibilities regarding the government’s financial aspect, which the finance commission fulfills and it has taken the country towards financial development at a good pace. It has provided much-needed stability to the financial structure.