Skip to main content

Key Recommendations of 14th Finance Commission

Horizontal Devolution Formula – 
  • Horizontal devolution means transfer of finance between states. The Commission added a new criterion of forest cover for devolution of Central taxes which has gone against the nine states. The panel has assigned 7.5 per cent weight to forest cover for inter-se determination of the shares of taxes to the states, while population carries 17.5 per cent weight, demographic change 10 percent, income distance 50 and area 15 per cent weight. With the addition of the new criterion, Uttar Pradesh is the biggest loser followed by Bihar. Meanwhile, 19 states stand to gain from the new arrangement. Arunachal Pradesh is the biggest gainer.
Devolution to states: 
  • It has recommended that devolution should be primary mode of funds transfers to states. States’ share in net proceeds from tax collections be 42% — a huge jump from 32% recommend by the 13th Finance Commission, and the largest change ever in the percentage of devolution. The higher tax devolution will allow states greater autonomy in financing and designing of schemes as per their needs and requirements.
Resource transfer: 
  • Tax devolution be the primary route resource transfer to states
Delinking of schemes: 
  • Eight centrally sponsored schemes (CSSes) will be delinked from support from the Centre; Consequent to the higher devolution of funds, the Centre is likely to re-evaluate several schemes that it sponsors for the States.
Cooperative federalism: 
  • There are recommendations on cooperative federalism, GST, fiscal consolidation road map, pricing of public utilities and PSUs, too.
  • Set up an independent council to undertake assessment of fiscal policy implications of Budget proposals.
  • Replace existing FRBM Act with a debt ceiling & fiscal responsibility law.
  • Wind up National Investment Fund and maintain all disinvestment receipts in the consolidated fund.
  • Amend electricity Act to provide for penalties for delay in payment of subsidies by state governments.
  • Set up autonomous and independent GST compensation fund
  • The commission suggested performance-based grants to panchayats and local bodies. It was recommended the ratio of basic-to-performance grant be kept at 90:10 for panchayats and 80:20 for municipalities.
  • The Commission had also asked to do away with a distinction between Plan and non-Plan expenditure.
  • 2% kept aside for natural calamities
Recommendations concerning PRIs and ULBs
o 5% devolved to ULBs
o New measures to augment local government resources were suggested such as municipal bonds.

The acceptance of the recommendations marks at least five major shifts from the past. They are:
  • The sizeable increase in tax devolution.
  • To suggest institutional mechanisms for better monitoring of fiscal rules (like replacement of FRBM Act with a new institution) and to achieve ‘cooperative federalism’.
  • Discontinuing the distinction between special category and other states.
  • Taking into account plan revenue expenditures while assessing revenue deficit grants.
  • Desisting from awarding sector/state specific grants or to subject grants to conditionality.

Labels

Labels:

Comments

Post a Comment

Popular posts from this blog

India’s challenge of securing the seas

Three recent events underline India’s efforts to highlight its growing maritime interests and ambitions in order to secure them unilaterally and in partnership with others. The first was the quiet release of the Indian Maritime Security Strategy (IMSS) titled  Ensuring Secure Seas   in October. The second was the holding of the combined senior commanders’ conference, with top officers from all three services, on board   INS Vikramaditya , the Indian Navy’s latest aircraft carrier and its largest platform, in December. The last and most recent was India’s hosting of its second International Fleet Review (IFR) at Visakhapatnam in early February. While the pomp and circumstance as well as the photo-ops of the IFR, which attracted naval vessels from 50 countries, predictably, created the biggest splash, its significance is best understood in tandem with the 185-page IMSS-2015. Although the document is simultaneously comprehensive, conservative and cautious, it conveys on...
Post a Comment
Read more

Differences between Indus civilization & Vedic Culture

What were the Differences between Indus civilization & Vedic Culture? The Indus civilization and Vedic culture constitute two great corner stone's in the history of Indian culture and civilization. When we make a comparison between the two, we notice more differences than similarities. Our sources of information of the Harappan civilization are mainly archaeological, while the Vedic culture is mostly known from the literary sources - the Vedas. Differences: Harappans are said to have been the original inhabitants of India while the Aryans, the founders of Vedic culture, are believed to have come to India from Central Asia. The Harappan civilization was urban in nature as is evidenced by its town-planning, drainage system, and granary and so on. The Vedic culture was rural. There is almost complete absence of towns in the Rigvedic period. At best the Rigvedic Aryans lived in fortified places protected by mud walls; and these cannot be regarded as towns in the Harap...
Post a Comment
Read more

India at 90th rank in terms of energy security, access: World Economic Forum

India  has been ranked at the  90th place in a list of 126 countries compiled by World Economic Forum (WEF) on the basis of their ability to deliver secure, affordable  and sustainable energy, which was topped by Switzerland . The latest  Global Energy Architecture Performance Index  Report, explored the energy architecture of 126 countries based on their ability to provide energy access across three dimensions of the "energy triangle" - affordability, environmental sustainability, security and access. The list was topped by Switzerland followed by Norway and Sweden in the second and third place, respectively. Others in the top 10 include France (4th), Denmark (5th), Austria (6th), Spain (7th), Colombia (8th), New Zealand (9th) and Uruguay (10th). Among the BRIC nations, Brazil was the top performer as it was ranked at the 25th place, followed by Russia (52nd), India (90th), China (94)y. Regarding India, the report noted that it is "facing a vast array o...
Post a Comment
Read more