{"id":69463,"date":"2020-11-12T15:53:25","date_gmt":"2020-11-12T10:23:25","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=69463"},"modified":"2021-05-17T12:31:32","modified_gmt":"2021-05-17T07:01:32","slug":"future-of-the-federal-framework","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/future-of-the-federal-framework\/","title":{"rendered":"Future of the federal framework"},"content":{"rendered":"

Context-<\/strong>\u00a0The role of the Finance Commission as a neutral arbiter in the Centre-state relation in achieving the delicate balance.<\/p>\n

What are the key highlights of the latest report?<\/strong><\/p>\n

The Fifteenth Finance Commission led by Chairman N. K. Singh\u00a0submitted its report for the period 2021-2026 to President of India.<\/p>\n

Title of the report<\/strong>\u00a0\u2013\u00a0\u2018Finance Commission in COVID Time\u2019s and the\u00a0scales are used to represent the balance between the States and the Union.<\/p>\n

Significance of report-<\/strong><\/p>\n

    \n
  1. The report will determine how India\u2019s fiscal architecture is reshaped.<\/li>\n
  2. And how Centre-state relations are reset as the country attempts to recover from the COVID-19 shock<\/li>\n<\/ol>\n

    What are the key points in the report that can impact states revenue share?<\/strong><\/p>\n

      \n
    1. The 15th Finance Commission, in its interim report had said, \u2018There is merit in ensuring\u00a0funds for defence and internal security<\/strong>\u00a0and this will receive appropriate consideration in our final report.\u2019<\/li>\n<\/ol>\n
        \n
      • This had led to speculation that states will have to contribute to such a fund, in turn leading to a drop in their share of central government\u2019s taxes.<\/li>\n<\/ul>\n
          \n
        1. Southern Indian states complaining\u00a0<\/strong>their efforts to control population would go against them. This is because the terms of reference of the 15th Finance Commission included using the 2011 census to suggest devolution of taxes to states.<\/li>\n<\/ol>\n
            \n
          • The 15th FC has considered the 2011 population along with forest cover, tax effort, area of the state, and \u201cdemographic performance\u201d to arrive at the states\u2019 share in the divisible pool.<\/li>\n<\/ul>\n

            What are the States issues?<\/strong><\/p>\n

            Recommendation of 14th<\/sup>\u00a0Finance commission<\/strong>\u2013 The commission had recommended\u00a0for an increase in the share of the States in total tax revenues from\u00a032% to 42%. However, states\u2019 share never touched 42 per cent of tax collections due to-<\/p>\n

              \n
            • Dominance of Centre<\/strong>\u2013 The Centre is trying to claw back the\u00a0fiscal space ceded to the states\u00a0and assert its dominance over the country\u2019s fiscal architecture. Central government spending has risen on items that lie in the state and concurrent lists.<\/li>\n
            • Shrinking of divisible pool<\/strong>\u2013\u00a0Centre has reduced the pool of funds to be shared with the States by shifting from taxes to cesses and surcharges, revenue from which is not shared with the states.<\/li>\n<\/ul>\n

              Way forward-<\/strong><\/p>\n

                \n
              • Finance Commission has to play an important role in achieving the delicate balance in the conflicting domain of finance by addressing the concerns of both the players.<\/li>\n
              • The Centre can reduce States\u2019 fears by tabling the report without delay, and address any apprehensions it may give rise to.<\/li>\n<\/ul>\n

                Federal Water Governance Ecosystem<\/a><\/p><\/blockquote>\n