Fourteenth Finance Commission

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The Fourteenth Finance Commission of India (2015-2020)

The five-year term of the Thirteenth Finance Commission ended in 2015. Hence, new recommendations were made enforceable by the Fourteenth Finance commission of India in February 2015. The recommendations of the Fourteenth Finance commission include:-
  • The resource will be transferred to the states primarily through tax devolution.
  • The Planned and Non-Planned distinctions were neglected in understanding the needs of the states.
  • From aids to tax devolution, the expanded devolution of the divisible pool of taxes is a “compositional shift in transfers”, as per the commission.
  • Variations in population (1971 census), forest cover and area, income distance from the poverty threshold, and so on, were the major parameters that were used by the commission in recommending a horizontal distribution.
  • The commission has used the 2011 census report with 90 percent weight-age and the area with 10 percent weight-age, to distribute the grants to the states for the local bodies.
  • The grants by the commission to the states were divided into two parts. Only properly constituted gram panchayats and municipalities were given the grants.
  • Further, the grants themselves were divided into two parts. One will be basic grants, while the other will be based on the performance of the municipalities and gram panchayats.
  • The grants will be given on fixed ratio of basic to performance. For municipalities it is 80:20 and for gram panchayats it is 90:10.
  • The commission has allocated Rs 2, 87, 436 crore as the total grant for the next five years. Grant of worth Rs. 2,00,292 crore is allotted to the gram panchayats, while the rest goes to the municipalities.
  • The principles, which were previously recommended by the centre for granting aid to the state, were abolished. Instead, the Fourteenth Finance Commission would consider state’s revenue expenditure needs.
  • The commission recommended that the sharing pattern of the schemes sponsored centrally be changed. For effective implementation of such schemes, the states should hold a bigger fiscal responsibility, the commission maintained.
Last Updated on : April 3, 2015