Points to Remember:
- Identity of the Chairman of the 14th Finance Commission.
- Key responsibilities and functions of the Finance Commission.
- Significance of the 14th Finance Commission’s recommendations.
- Impact of the recommendations on Indian federalism.
Introduction:
The Finance Commission is a constitutional body in India established under Article 280 of the Constitution. It is tasked with recommending the distribution of net proceeds of taxes between the Union and the States, and the principles governing grants-in-aid to the States from the Consolidated Fund of India. The 14th Finance Commission, constituted in 2013, held particular significance due to its recommendations impacting the fiscal landscape of India during a period of significant economic change. Its chairman played a crucial role in shaping these recommendations.
Body:
1. The Chairman: Dr. Y.V. Reddy
The Chairman of the 14th Finance Commission was Dr. Y.V. Reddy, a distinguished economist and former Governor of the Reserve Bank of India. His extensive experience in monetary policy and fiscal management brought a unique perspective to the Commission’s deliberations. His background provided credibility and expertise to the Commission’s work.
2. Key Responsibilities and Functions of the 14th Finance Commission:
The 14th Finance Commission’s mandate included:
- Determining the principles governing the distribution of the net proceeds of taxes between the Union and the States.
- Recommending the grants-in-aid to the States from the Consolidated Fund of India.
- Examining the existing principles governing the distribution of the net proceeds of taxes and grants-in-aid to the States.
- Suggesting measures to augment the Consolidated Fund of India and the resources of the States.
- Making recommendations on any other matter referred to it by the President.
3. Significance of the 14th Finance Commission’s Recommendations:
The 14th Finance Commission’s recommendations were significant for several reasons:
- Increased Devolution: A key feature was a substantial increase in the share of States in the net proceeds of taxes from 32% (as recommended by the 13th Finance Commission) to 42%. This marked a significant shift in fiscal federalism, empowering States to manage their finances more effectively.
- Focus on Performance: The Commission emphasized performance-based grants, incentivizing States to improve their governance and service delivery.
- Local Governance: The Commission also focused on strengthening local governance by recommending increased funding for Panchayati Raj Institutions and urban local bodies.
4. Impact on Indian Federalism:
The increased devolution of funds to States, as recommended by the 14th Finance Commission, had a profound impact on Indian federalism:
- Positive Impacts: It enhanced the fiscal autonomy of States, allowing them to undertake development initiatives based on their specific needs and priorities. It fostered greater competition among States to improve their performance.
- Negative Impacts (Potential): The increased autonomy could potentially lead to disparities in development across States if not managed effectively. Some argued that the performance-based grants might disadvantage less developed States.
Conclusion:
Dr. Y.V. Reddy’s chairmanship of the 14th Finance Commission was instrumental in shaping its recommendations, which significantly altered the fiscal landscape of India. The increased devolution of funds to States represented a landmark shift in Indian federalism, promoting greater fiscal autonomy and incentivizing better governance. While the increased autonomy carries the potential for disparities, the emphasis on performance-based grants aimed to mitigate this risk. Moving forward, continuous monitoring and evaluation of the impact of the 14th Finance Commission’s recommendations are crucial to ensure equitable development and strengthen cooperative federalism. A focus on capacity building in less developed States and transparent allocation mechanisms will be essential to realize the full potential of this significant fiscal reform. This will ultimately contribute to a more balanced and sustainable development trajectory for India, upholding the principles of cooperative federalism enshrined in the Constitution.
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