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Public Finance and Budget

Finance Commission

The article 280 in the Indian constitution talks about forming the Finance Commission of India. This is done to look after the allocation of resources between the state and the central governments. Thus, it is one of the important pillars of the federal system of the constitution of India

Finance Commission of India 

Under article 280, president of India appoints the finance commission for every five years. Thus, FCI is a constitutional body. The main function of the finance commission in India is to maintain the financial relations between the state and the center. 

Finance Commission of India

                                                                                                                                               Source: 2thepoint.in 

The Indian constitution states that the finance commission in India should consist of a chairman and 4 members. Out of the 4 members, 2 should be full time and 2 should be part-time.

Currently, the 15th finance commission of India has been established. It was established in 2017 and it will operate from 2020 to 2025. Below is the composition of 15th finance commission of India: 

  • Chairman – N.K.Singh
  • Full-time member – Dr. Anoop Singh 
  • Full-time member – Shaktikanta Das
  • Part-time member – Dr. Ramesh Chand
  • Part time member – Dr. Ashok Lahiri

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Members of FCI

As stated above, the members of FCI should consist of a chairman and 4 other members. Also, the chairman should have adequate experience in public affairs. Furthermore, the four members should be selected based on the following criteria: 

  • The person should have specialized knowledge of accounts and finances of the government. 
  • A judge of the high court or someone who is qualified to be appointed as a judge of the high court. 
  • A person who has a wide knowledge in the field of economics. 
  • The person should have wide experience in the field of administration and financial matters. 
  • Functions of finance commission of India.

Functions of FCI

The important functions that are listed under the FCI (finance commission of India) are as below: 

  1. The net proceeds of taxes and distribution between the union and the state government are to be divided between under chapter 1, part 12 of the Indian constitution. Also, the allocation between the states should be respectful of such proceeds. 
  2. The principles that govern the grant-in-aid for the revenue of the states based on the consolidated funds of India and total sums to be paid for the states by the ways of grant-in-aid for the revenue should be under article 275. Also, this should be for the purposes of the constitution other than those that are specified under clause 1 of the article. 
  3. There are measures required for augmenting the consolidated fund of the state. Also, it is done to supplement the resources of the municipalities and panchayats. This is based on the recommendations made by the finance commission. 

Apart from the main functions mentioned above, the other functions of FCI include: 

  1. Advising the president based on his request on any matters that are related to sound financial practice. Also, this is done strengthening the financial status of the state and central governments. 
  2. The study related to the financial situation and financial status of the state and central governments based on the request by the President of India. 

Practice Questions on Finance Commission

Q. How many finance commissions have constituted in India till date?

A. 12

B. 13

C. 14

D. 15

Answer: C. 14

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