Finance Commission and Recommendations of the Finance Commission

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The Finance Commission and recommendations of the Finance Commission are being done in accordance with the India Finance Commission Act, which was laid down during the British rule in the early 1920s.The main preamble to the Finance Commission and recommendations of the Finance Commission are being defined in the Finance Commission (Miscellaneous Provisions) Act, 1951.

Background of the Finance Commission of India

A defined frame of was drafted during the early 1920s. This was drafted with the main motto of maximum exploitation of business opportunity for the British ruler. The provision for the basic constitution of the finance commission of India was a hollow structure and thus it drew large-scale protests from different leaders of India. The British government then ordered formation of a commission to look into the drawback of the drafted provision of the constitution of finance commission of India.

Selection Process of the Finance Commission of India

  • The President of India shall, within maximum of two years from the commencement of the draft and thereafter completion of every fifth year or at earlier time (as he deems necessary), by order should constitute a Finance Commission

  • The Finance Commission shall consist of a chairman and four other members, appointed by the President himself

  • The elected parliament may by formulating appropriate law determine the qualifications of such members of the Finance Commission and it may also determine the manner in which the members shall be selected



The Finance Commission and recommendations of the Finance Commission

  • The duties of the Finance Commission shall entail recommendation to the President of India on -

    • Distribution of the income of the government (including central and state governments) as per proportion or according to the contribution made towards such collection of revenues by each such state governments or central government

    • Define the grounds on which the government should allocate the grants-in-aid of the revenues of the Indian states out of the consolidated fund of India. The quantum of allocation of such funds need to compliment the requirements of the panchayat and resource of the Consolidated Fund of a State

    • The quantum of allocation of such funds need to compliment the requirements of the Municipalities in the State and the resources of the Finance Commission of the State

    • Any other matter referred to the Commission by the President in the interests of sound finance.

  • The Finance Commission of India shall also determine the operational process and is vested with such powers in the operation as per the provisions enacted by the parliament of India