The Union Cabinet chaired by Prime Minister Narendra Modi has extended the term of 15th finance commission by a month to “address serious concerns regarding allocation of adequate, secure and non-lapsable funds for defense and internal security of India”. In this article, we are going to cover everything that yo need to know about it.
What is the Finance Commission?
Finance commission or Vita Aayog was first established in 1951 and it is set up every five years under article 280 of the Indian constitution, by the president of India. The finance commission defines the financial relationship between center and states.
Article 280 requires finance commission to recommend
- how the net proceeds of taxes between central and state governments is to be divided as per their respective contribution of taxes,
- the principals to be followed by the central government for providing grant-in-aids to the states,
- the measures to be taken by the central government to augment the consolidated funds of the states, and
- any other matter referred to it by the president.
15th Finance Commission
15th finance commission was constituted on 27th November 2017, by the union government with the approval of president of India, to make recommendations for five fiscal years commencing 1st April 2020 till 31st March 2025. It is chaired by N.K. Singh, economist, ex-bureaucrat and former Member of Parliament and Arvind Mehta is the secretary to the commission. The full-time members of the commission are Ajay Narayan Jha, former IAS officer and ex-finance secretary; Ashok Lahiri, Chairman of Bandhan Bank, and Dr Anoop Singh, Professor of Georgetown University. The commission also has Dr Ramesh Chand, member of NITI Aayog as part-time member. Shaktikanta Das, former Secretary Economic Affairs, served as member from November 2017 to December 2018. The aim of the commission was to make recommendations for devolution of taxes and other fiscal matters and it was supposed to make its report available by 30th October 2019; however, the Cabinet approved the extension of its term till 30th November and amended its terms of reference to address concerns regarding funds for defense and internal security of India.
Conclusion
In India, inadequate funds for defense has been a serious issue for many years and the root cause of the problem is the difficulty in raising funds through taxation, private and public borrowing, and other means to meet the requirement of such funds without compromising on funds for the sectors like education, health, agriculture and infrastructural development. The 15th Finance Commission has been asked to examine that what would constitute the adequate budget outlay for defense and security, and if a different mechanism can be created to allocate the required funds, but the challenge lies in the limit set by the constitutional provision. The previous two finance commissions failed to address similar concerns properly because of the limitation of constitutional mandate.
Hi! I am Sahana Chakraborty. I am pursuing M.Sc. in Economics from University of calcutta. I love to travel and experience new cultures. If I could do anything in the world, I would travel the world and write about it. My hobbies include reading, writing, cooking and talking to my cat.
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