Breaker(s) Ahead: The 15th Finance Commission


The Finance Commission, is a body that focuses on the expenditure related between Centre and the States. The purpose of the commission in aims at evolving methods to make the revenue sharing between the centre and the states more effective and give it a unionist tinge.

India is a union of states with a strong centralising tendency, thus that is what the finance commission does, remains a facilitator to help the centre and the states to make effective use of the funds in the consolidated fund. The commission also watches over th distribution of money between the state and the municipal bodies and the gram panchayats. All of this remains in line with the policies of the Centre.

The fifteenth finance commission has been constituted with a broader perspective of focusing on the recent developments in the economy, and make them tune well with the states. The function of this commission is just like the first one which had to tackle policies to build a new federation.

Mr NK Singh, the chairman of the fresh finance commission is an experienced man with the erstwhile planning commission. The tasks of this finance commission are not easy and they are posed to deal with the breakers that lie ahead.

The immediate tasks of the new finance commission will be to look into the new revenue sharing between the states and the centre in the backdrop of the new taxation regime put in place by the implementation of the Goods and Services Tax (GST). the states and the centre are possibly trying to cope up with the loss in the revenue which has been made by the implementation of the GST, where the ordinary businessman finds it uneasy to file returns, while the government tries its level best to provide a user-friendly interface and hassle free services with the aid of tech giant Infosys.

There is another problem which is simmering on the back burner, those problems are deeply integrated with the ailing banking sector which is currently dealing with the largest pile of NPAs and bad loans. Amidst these, there is redundant economic sluggishness defined by slow output in the industrial growth and credit cycles.

The biggest glitch is the states that have announced farm loan waivers and the states in the que that are yet to announce the farm loan waivers, which will impact the consolidated funds of the states. The finance commission will have to look at the shallow pockets of the nation ad its constituents and suggest a way forward, while reducing the risks and delivering what the masses need.

The other problem seems to be coming from the urban local bodies and village bodies that are dragging their feet under the calls for speedy development and fund crisis. As the calls for smart cities and smart villages grow louder, the states will see their pockets over burdened with limited resources at bay.

Theses are just the broad pictures, while the states where there are BJP governments, may fall in line to the tune of the commission, those with the parties from the opposition may not feel the spirits and may shy away. Recently, Rajnath Singh held a meeting of the inter state council (12th) where he had the opportunity to stress upon co-operative federalism.

The need of the hour remains a concerted effort to build wide consensus among the states and to pursue a common fiscal agenda to meet the fiscal goals that are being emboldened by the economy at large. The states have to put the gears together with the centre to promote the development spree if the economy has to grow at unbeatable levels and provide jobs, at the times of diminished revenues and economic output.

Though India Inc has positive macroeconomic credentials, agriculture, industrial and services sectors call for greater round the clock management which has to be tackled by the this commission, while streamlining the post-GST status of the economy.

The commission will also have to take the opposition into confidence to promote a co-operative agenda and will have to work closely with the NITI Aayog, PM’s Economic Advisory Council, RBI’s MPC, and the states. Some serious business needs to be done to manage the overall situation.



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