Role Of Finance Commission

India is a developing country. There are various responsibilities that the government has regarding the development of all its citizens. This development process requires a lot of funding and monetary investment, which comes from the revenue generated by the government through the collection of taxes. There are many states in the country and there is a diverse difference in population as well the contribution in taxes. India is a democracy, and at the time of its independence, it was suffering from a significant financial and economic crisis. Therefore, the prime focus of the government was to develop the country and provide it with financial strength. 

There are various states which are totally different in earrings and a dire need of development. The government’s plan has always been to believe in equal distribution of resources to promote equal distribution of wealth. Therefore, a developed country will not have a significant disparity in wealth distribution, and all the citizens will have uniform resources. 

The Government of India governs the republic of India, and all the states work to develop themselves. It is the responsibility of the government to promote overall growth and maintain coordination among all the states so that there is overall growth in the country. Many states of the country don’t contribute as much as the other ones, but the work of the government is not to distribute these funds based on the contribution, but it is done based on the need for development in the state. This is the primary reason behind the establishment of the finance commission in the country, which this article will focus on.

Finance Commission

The Finance Commission was born in the year 1951 with a constitution made by the then minister of law, Dr B.R Ambedkar, who primarily focused on the need for a system that could analyse the financial needs of the various states of the country. The first finance commission was set up in 1951 for a tenure of two years, but after that, there was a financial commitment with a time span of five years each. The finance commission is the body of the government which works on the allocation of monetary resources along with analysing the need for any upgradation in the financial setup. It was formed under article 280 of the Indian constitution, which is the longest in the world and is a living document.

Structure of the Finance Commission

The finance commission is formed under the miscellaneous act 1951, which defines all the provisions and responsibilities of the omission. Along with the jurisdiction and the role, the act also defines the eligibility criteria of a member or chairman of the commission. If a person fails to follow and satisfy the following criteria, they won’t be eligible for any position in the finance committee of the country.

1. The person who is eligible for any position in the commission must be a judge or have the eligibility to be one.
2. Only a person with immense and diverse knowledge of the financial field can be appointed as a member of the financial commitment.
3. Every member of the financial commitment must have expertise in the Indian economy.

Any person who comes under any of the following criteria or categories will be immediately disqualified from the position of a member of the finance commission

1. Members of the finance committee must not take any personal monetary benefit out of the government’s finances.
2. There should be no clash in the personal and professional interests of the person.
3. The person should not be a lunatic.
4. They should commit no criminal offenses.

The president of the country appoints the members of the finance committee and the government decides the eligibility criteria. The setup of the commission is such that there is a chairman and four members, excluding the chairman.

Role of the Finance Commission

There are various responsibilities to be fulfilled by the finance commission, which are given below.

1. The government’s taxes are either transferred to the central government, the state government, or to both in specific proportion. It is the responsibility of the finance committee to transfer this amount to eligible parties.
2. Some of the states need more development than the others, or there is some severe crisis going on which might need more financial investment or funding than usual. The finance commission analyses all this and advises the government on funds allocation.
3. If there is any kind of upgradation in the financial structure, then it is the responsibility of the financial commitment to advise the government and the president.

Chairman of the Finance Commission

The chairman of the finance committee must fulfill all the responsibilities of the finance commission and work hand in hand with its full time and part-time members. The current chairman of the finance commission is Nand Kishore Singh. He works along with the four commission members, namely Shaktikanta das, Anup Singh, Dr Ashok Lahiri, Ajay Narayan Jha and Dr Ramesh Chand.

Conclusion

The finance commission of India is the core of resource allocation for all the states and has been working actively since the time of its inception. It plays a very crucial role in financial upgradation as well as overall economic development of the country.