Fifteenth Finance Commission submits report to President

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News: The Fifteenth Finance Commission (FFC) has submitted its first report to President Ram Nath Kovind

Facts:

About Finance Commission

  • The Finance Commission is a constitutional body constituted by the President under Article 280 of the India Constitution. The Commission is appointed every five years.

Composition:

  • The Finance Commission has a chairman and four members appointed by the President.
  • The Chairman of the Commission is selected from among persons who have had experience in public affairs.
  • The four other members are selected from among persons who

o   are or have been or are qualified to be appointed as Judges of the High Court; or

o   have special knowledge of the finances and accounts of Government or

o   have had wide experience in financial matters and in administration or

o   Have special knowledge of economics.

Functions:

Finance Commission and its functions: The Finance Commission has the following functions or duties:

  • The Commission makes recommendations to the President of India on the distribution of tax proceeds between the Union and the States and the share of each state.
  • The Commission also decides the principles that govern the payment of grants-in-aid to states from the Consolidated Fund of India.
  • The President of India can also refer to any other matter to the Finance Commission in the interest of building a sound financial system.

About 15th Finance Commission

  • The 15th Finance Commission was constituted by the President of India under the chairmanship of NK Singh.
  • The term of the commission was originally set to end in October 2019 but was extended to November 30, 2019.
  • Its recommendations will cover a period of five years from April 2021 to March 2026.

Terms of Reference (ToR) of 15th Finance Commission

The Central government asked the 15th Finance Commission’s ToR to use the 2011 data for determining devolution of taxes, duties and grants-in-aid. The terms of reference for the 14th Finance Commission were to use the 1971 Census data

  • Review the current status of finance, deficit, debt levels, and cash balances and fiscal discipline efforts of the Union and the States.
  • Put forward a tax-devolution formula after examining the impact of 42% vertical devolution (as recommended by 14th FC) on the Union’s fiscal situation. The Commission has been asked to consider New India – 2022 Vision and government’s commitment to compensate states’ loss due to GST.
  • Examine whether revenue deficit grants be provided at all.
  • Recommend performance-based incentives to the states depending on various parameters such as efforts made in the expansion of GST tax-net, Efforts made in achieving replacement level of population growth i.e. Total Fertility Rate 2.1 or lower, promoting digital economy, behavioural changes towards open defecation etc.
  • Review the present arrangements on financing Disaster Management initiatives, with reference to the funds constituted under the Disaster Management Act, 2005 (53 of 2005), and make appropriate recommendations thereon.

Additional Information:

New India – 2022 Vision

  •  It envisages India free from poverty, corruption, terrorism, communalism, casteism and uncleanliness and unites the entire country by adopting good governance and using technology.
  • The Prime Minister launched “Sankalp Se Siddhi” (Attainment through Resolve) scheme, which aims at good governance. It is a five-year plan under which new India movement 2017-2022 is undertaken.
  •  Under the New India 2022 Vision, the government has launched several schemes such as Pradhan Mantri Ujjawala Yojana, Pradhan Mantri Jan Dhan Yojana, Jan Suraksha Yojana, Ayushman Bharat etc.
  • The NITI Aayog has put forward National Strategy for New India @ 75, which defines clear objectives for 2022-23