Model Question and Answers for APSC | How have the recommendations of the 14th Finance Commission of India enabled the states to improve their fiscal position? (UPSC Mains-2021 GS-II)
Ans : The Finance Commission is a Constitutional body formulated under Article 280 of the Indian Constitution. It makes recommendations regarding the devolution of taxes between the Center and the States from the divisible pool.
The Fourteenth Finance Commission(FFC) had submitted its recommendations for the period 2015-16 to 2020-21. They are likely to have major implications for center-state relations, for budgeting by, and the fiscal situation of, the center and the states.
FFC enabled the states to improve their fiscal position
1. The FFC has radically enhanced the share of the states in the central divisible pool from the current 32 percent to 42 per cent which is the biggest ever increase in vertical tax devolution
2. Increased tax devolution has provided the states with untied resources.
3. Thus, the increased tax devolution has provided states with a greater degree of expenditure autonomy
4. The FFC has also proposed a new horizontal formula having new variables Forest cover and 2011 census thus benefitting larger states
5. Several other types of transfers had been proposed including grants to rural and urban local bodies, a performance grant along with grants for disaster relief and revenue deficit. These transfers total to approximately 5.3 lakh crore for the period 2015-20