{"id":6128,"date":"2020-02-04T14:49:37","date_gmt":"2020-02-04T09:19:37","guid":{"rendered":"https:\/\/triumphias.com\/blog\/?p=6128"},"modified":"2020-02-04T14:49:37","modified_gmt":"2020-02-04T09:19:37","slug":"recommendations-of-the-15th-finance-commission-highlights","status":"publish","type":"post","link":"https:\/\/triumphias.com\/blog\/recommendations-of-the-15th-finance-commission-highlights\/","title":{"rendered":"Recommendations of the 15th Finance Commission: Highlights"},"content":{"rendered":"<p><span style=\"color: #0000ff;\"><strong>Relevance: Mains: G.S paper II: Polity: Governance: Finance Commission &amp; G.S paper III: Economy: Economic policies and Schemes: Recommendations<\/strong><\/span><\/p>\n<p><a href=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/Finance-comms.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-6129\" src=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/Finance-comms.png\" alt=\"\" width=\"960\" height=\"720\" \/><\/a><\/p>\n<p><span style=\"color: #ff0000;\"><strong>Context:<\/strong><\/span><\/p>\n<ul>\n<li>The interim report of the 15th Finance Commission, tabled in Parliament has largely preserved the devolution mathematics of its predecessor, belying concerns of a sizeable cut in States\u2019 share.<\/li>\n<\/ul>\n<p><span style=\"color: #ff0000;\"><strong>Recommendation highlights:<\/strong><\/span><\/p>\n<ul>\n<li>The commission has recommended a one percentage point reduction in the vertical split of the divisible pool of tax revenues accruing to States to 41%.<br \/>\n\u2022 This follows the reorganisation of the erstwhile State of Jammu and Kashmir into the Union Territories of Jammu and Kashmir and Ladakh.<br \/>\n\u2022 While the former State\u2019s notional share based on the parameters for horizontal devolution would have been about 0.85%, the commission has cited the security and other special needs of the two territories to enhance their aggregate share to 1%, which would be met by the Centre.<br \/>\n\u2022 As part of an effort to balance the principles of fiscal needs, equity and performance as well as the need to ensure stability and predictability in transfers, the criteria for the horizontal sharing of taxes among States have been rejigged.<\/li>\n<\/ul>\n<p><a href=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/finance.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-6131\" src=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/finance.jpg\" alt=\"\" width=\"630\" height=\"364\" \/><\/a><\/p>\n<p><span style=\"color: #ff0000;\"><strong>Demographic performance:<\/strong><\/span><\/p>\n<ul>\n<li>A crucial new parameter, demographic performance, has been added to the mix.<br \/>\n\u2022 Having been mandated to adopt the population data from the 2011 Census, the commission has incorporated the additional criterion to ensure that States that have done well on demographic management are not unfairly disadvantaged.<br \/>\n\u2022 And since the norm also indirectly evaluates performance on the human capital outcomes of education and health, it has been assigned a weight of 12.5%.<br \/>\n\u2022 This should address the concerns voiced by several States over the switch to the 2011 Census from the 1971 data.<\/li>\n<\/ul>\n<p><span style=\"color: #ff0000;\"><strong>Reduction is share of taxes:<\/strong><\/span><\/p>\n<ul>\n<li>Among the States, with the exception of Tamil Nadu, all the other four southern States see a reduction in the recommended share of taxes for the year 2020-21.<br \/>\n\u2022 It suggested devolution to Odisha and Uttar Pradesh have also shrunk in percentage terms.<br \/>\n\u2022 Crucially, the commission has flagged the issues dogging the GST, especially as indirect taxes constitute almost half the total tax revenues of the Union.<br \/>\n\u2022 From the sizeable shortfalls and volatility in collections, to serious cases of fraud, the new tax has yet to stabilise leaving a majority of the States dependent on compensation from the Centre.<br \/>\n\u2022 The commission\u2019s effort to improve the granularity in devolution to local bodies has generated some interesting results.<br \/>\n\u2022 Urban local bodies, especially municipalities in cities with populations of more than one million, are set to get a larger share of the pie.<\/li>\n<\/ul>\n<p><span style=\"color: #ff0000;\"><strong>Way forward:<\/strong><\/span><\/p>\n<ul>\n<li>However, the increase in the percentage of outcome-tied funds to 50%, from 10%, could prove vexing to the last mile providers of basic services in India\u2019s federal and highly fragmented structure of governance.<br \/>\n\u2022 The commission has also been justifiably critical of the Union and State governments\u2019 tendency to finance spending through off-budget borrowings and via parastatals.<br \/>\n\u2022 It has done well to ask that such extra-budgetary liabilities be clearly earmarked and eliminated in a time-bound manner.<\/li>\n<\/ul>\n<figure id=\"attachment_6135\" aria-describedby=\"caption-attachment-6135\" style=\"width: 960px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/FinanceCommissionofIndia.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-6135\" src=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/FinanceCommissionofIndia.jpg\" alt=\"\" width=\"960\" height=\"720\" \/><\/a><figcaption id=\"caption-attachment-6135\" class=\"wp-caption-text\">Functions. Distribution of net proceeds of taxes between Centre and the States, to be divided as per their respective contributions to the taxes. Determine factors governing Grants-in Aid to the states and the magnitude of the same. to make recommendations to President as to the measures needed to augment the Consolidated Fund of a State to supplement the resources of the panchayats and municipalities in the state on the basis of the recommendations made by the Finance Commission of the state.\u00a0<\/figcaption><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>Relevance: Mains: G.S paper II: Polity: Governance: Finance Commission &amp; G.S paper III: Economy: Economic policies and Schemes: Recommendations Context:<\/p>\n","protected":false},"author":1,"featured_media":3530,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[123,18,42],"tags":[392],"class_list":["post-6128","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","category-general-studies-ii","category-general-studies-iii-technology-economic-development-bio-diversity-environment-security-and-disaster-management","tag-union-public-service-commission-upsc"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/6128","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/comments?post=6128"}],"version-history":[{"count":1,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/6128\/revisions"}],"predecessor-version":[{"id":6136,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/6128\/revisions\/6136"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/media\/3530"}],"wp:attachment":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/media?parent=6128"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/categories?post=6128"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/tags?post=6128"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}