14th Finance Commission Recommendations

March 22, 2019
 
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The Fourteenth Finance Commission (FFC) was appointed on 2nd January, 2013 under the chairmanship of Dr. Y. V. Reddy. The FFC has submitted its recommendations for the period 2015-16 to 2020-21. The one of the important 14th Finance Commission recommendations is enhanced share of the state in the revenue.

14th Finance Commission Recommendations

14th Finance Commission Recommendations

  • The FFC has radically enhanced the share of the states in the central divisible pool from the current 32 percent to 42 per cent which is the biggest ever increase in vertical tax devolution.
  • Revenue compensation to States under GST should be for five years; 100% in first three years, 75% in fourth year and 50% in fifth year
  • Revenue compensation to States under GST should be for five years; 100% in first three years, 75% in fourth yearand 50% in fifth year
  • Create an autonomous and independent ‘GST Compensation Fund’ through legislative actions to facilitate the compensation process
  • Suggesting a fiscal consolidation roadmap, FFC puts a ceiling on fiscal deficit at 3% of GDP from 2016-17 onwards
  • Establish an independent Fiscal Council to undertake ex-ante assessment of fiscal policy implications of budget proposals and their consistency with fiscal policy and rules
  • FFC has recommended grants in two parts; a basic grant, and a performance grant, for duly constituted Gram Panchayats and municipalities. The ratio of basic to performance grant is 90:10 with respect to Panchayats and 80:20 with respect to Municipalities
  • FFC has recommended out a total grant of Rs 2,87,436 crore for five year period from 1.4.2015 to 31.3.2020. Of this the grant recommended to Panchayatas is Rs 2,00,292.20 crores and that to municipalities is Rs 87,143.80 crores.
  • There is no distinction between plan and non planned expenditure.

Recommended Reading

Read Chapter on Public Finance in India from Indian Economy by Ramesh Singh

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