Introduction

The President of India constitutes the Finance Commission and this commission represents the financial relationship between the central government and each state government of India. In the year 1951, the first commission was set up under the Finance Commission Act. 15 Finance Commissions have been set up since 1950.

Discussion

Concept of Finance Commission in India

The Finance Commission has been set up to look after the financial activities of the government and protect the public finances. This commission maintains the relationship between the central government and the individual state government. This commission is set up after every 5 years and in the commission, there is one chairperson and four members to run the financial activities across the country.. In 2017, the last Finance Commission was constituted and N.K Singh is the chairperson of this commission. New Delhi is the headquarters of this commission. 

15th Finance Commission

The 15th Finance Commission has been constituted for the devolution of different fiscal matters and taxes for 5 fiscal years. The Chairman of this commission is Nand Kishore Singh. In the 15th Finance Commission, there are different financial departments to manage the economy of India such as the “Department of Economic Affairs, Government of India, and Ministry of Finance”. These are the parent departments of the 15th Finance Commission. This commission needs approval from the President via the notification in “The Gazette of India”. The 15th Finance Commission has been constituted for strengthening cooperative federalism, protecting fiscal stability, and improving the quality of public spending. For the rollout of GST, the activities of the commission’s job were harder as the power related to the taxation has been taken away from the state and handed over to the GST Council, and the same was noted in newspapers named “The Economic Times” and “The Hindu”.

State Finance Commission

The Governor of the states has the responsibility to constitute the state finance commission under Article 243-I. The state government has to constitute the commission every five years to take the decision related to the resource allocation between the Panchayat and the state government. Activities of municipalities and the city councils are conducted under Articles 243-A. 

Role of State Finance Commission

The role of the State Finance Commission is similar to the central Finance Commission. The State Finance Commission allocates the resources to the Panchayati Raj at the three levels such as levies, taxes, and duties that need to be collected by the local bodies and the state also. The central government has divided the taxes between the state government and the union government. The State Finance Commission reviews the financial condition of the Panchayat and makes some recommendations to the Governor to look after the distribution of taxes. The state government collects levies, taxes, duties, and toll fees from the state and the Panchayati Raj Institution at the three levels. The State Finance Commission can improve the financial condition of the Panchayati Raj Institute and measure the improvement of that area. It improves the fiscal relationship across India and maintains a healthy relationship with the central Finance Commission. There are 18 State Finance Commissions in India. This commission provides “financial assistance” to medium and small enterprises. It can be said that the State Finance Commission is an important aspect of finance to meet the needs of the different industries. This commission provides loans to private and public companies and these companies can increase the importance in India and strengthen the cash flow. These activities of the State Finance Commission help the state to get financial guidance from the commission and it can strengthen the economy of the state that promotes the strong economy of the central.    

Conclusion

The Financial Commission has the responsibility to build a healthy economy all over India and protect the public interest. Sometimes small and medium enterprises face problems after taking the loan as it becomes tough to repay the loan due to the bad loan policy. These industries want to get other fiscal assistance except loans but the financial corporation only focuses on providing loans. This commission has to make its policy flexible according to the public interest.