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Fourteenth Finance CommissionSubscribe to Fourteenth Finance Commission

Continuity with Change

Vol. 56, Issue No. 33, 14 Aug, 2021
Ajay Narayan Jha

The two latest finance commissions—the Fourteenth Finance Commission and the Fifteenth Finance Commission—mark a break from the past. The paper explores the structural shift in federal finances with the abolition of the Planning Commission and contemporaneous circumstances that shaped the approach of the Fifteenth Finance Commission and examines the intersections and divergence, continuity and change with the Fourteenth Finance Commission in terms of its treatment of and approach to the three core issues of vertical and horizontal devolution, grants-in-aid to the states and transfers to local governments. It argues that the pervasive impact of the pandemic has shaped the recommendations of the Fifteenth Finance Commission in several ways without compromising on the constitutional principles and retaining the balance in federal transfers between the union and the states and amongst the states. At a time when the growth prospects of the economy are uncertain, the innovative use of targeted grants linked to performance-based criteria for specified sectors through the states and local governments addresses glaring gaps in public services and potentially trigger reform in critical sectors.

 

Progressiveness of Finance Commission

Vol. 55, Issue No. 43, 24 Oct, 2020
Barna Ganguli, Bakshi Amit Kumar Sinha

The implications of the recommendations of the Fourteenth Finance Commission on finances of Bihar as a result of changes in the tied, untied and overall union devolution are identified. The data reveals that there is an increase in tax devolution, but its share in grants, plan and non-plan, has come down drastically, hardly reflecting any increase in the total resources transferred. In reality, there has been a decrease of 1.3 percentage points in the share of tax devolution for Bihar between Thirteenth and Fourteenth Finance Commissions. Along with the revenue loss due to liquor ban, this loss has huge financial implications for Bihar’s exchequer.

Indian Fiscal Federalism at the Crossroads

Vol. 55, Issue No. 5, 01 Feb, 2020
Lekha Chakraborty

The abolition of the Planning Commission, the creation of the NITI Aayog, the constitutional amendment to introduce the goods and services tax, the establishment of the goods and services tax council, and the historically high tax devolution to the states based on the Fourteenth Finance Commission have changed the union–state fiscal relations fundamentally. The changing contours of union–state fiscal relations discussed in the context of the release of a recent book Indian Fiscal Federalism by Y V Reddy and G R Reddy are presented here.

Is the Special Category Status Really Dead?

Vol. 53, Issue No. 20, 19 May, 2018
Govind Bhattacharjee

Though the Fourteenth Finance Commission report gives an impression that the special category status given to some states has de facto been abolished, the reality is that the benefi ts enjoyed by these states remain well protected. The biggest flaw of the special category mechanism is that the benefits flow in perpetuity without any accountability or performance monitoring of the states. This has made them overwhelmingly dependent on central funding. It is therefore imperative to bring in more accountability into the mechanism of such liberal transfer of funds and their end use.

Emerging Issues in Union–State Fiscal Relations

Vol. 52, Issue No. 9, 04 Mar, 2017
Pinaki Chakraborty

The restructuring of non-Finance Commission Grants is an improvement when it comes to scheme-related transfers. However, when 10 schemes constitute 90% of core grants, there is further scope for rationalisation of these schemes. The implications of following a sustainable debt path under the new Fiscal Responsibility and Budget Management framework in the budget indicate a larger fi scal correction at the state level vis-à-vis the union government.

Karnataka's Changing Fiscal Landscape

Vol. 51, Issue No. 33, 13 Aug, 2016
Pranay Kotasthane, Varun K Ramachandra

Analysing the second Karnataka budget since the Fourteenth Finance Commission award, it is noted that, as assured, more fiscal space is made available to the state government. With greater untied funds, the state has budgeted for higher capital expenditure in some key areas--urban development, police, and tribal welfare--even as it failed to build capacity for power generation, and has introduced too many schemes with too little funds allocated to each.

Underutilised Fiscal Space

Vol. 51, Issue No. 21, 21 May, 2016
S L Shetty

The hike in tax devolution to states by the Fourteenth Finance Commission to give a larger fiscal space to the states has meant sharp cuts for centrally-sponsored schemes. Studying the case of Maharashtra, it is found that without adequate norms and yardsticks of development expenditure, the state has failed to exploit its fiscal potentials.

Evolving Centre–State Financial Relations

Vol. 51, Issue No. 16, 16 Apr, 2016
Pinaki Chakraborty, Manish Gupta

After the Fourteenth Finance Commission award, aggregate transfers as a percentage of gross domestic product has increased, while grants as a percentage of GDP has declined. The centre is resorting to cess and surcharges that are not shared with the states. This would mean denial of revenue to states, which goes against the spirit of the Constitution. Further, the states have a reduced untied fi scal space, with the union’s share in Centrally Sponsored Schemes in 2016–17 (BE) being reduced. Finally, in the absence of plan transfers, post 2017–18, the focus should be to develop a framework for non-fi nance commission grants to states which is predictable and certain.

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