Finance Commission devolution
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Subject: Economy
Context:
FC chairperson N.K. Singh said that the pandemic has necessitated reconsideration of 42% devolution assigned in the 2020-21
Concept:
- The Finance Commission is a constitutional body set up by the President of India, every five years or earlier to decide the share of the Union government and state governments in the divisible pool of tax revenue under Article 280
- Each Finance Commission is required to make recommendations on: (i) sharing of central taxes with states, (ii) distribution of central grants to states, (iii) measures to improve the finances of states to supplement the resources of panchayats and municipalities, and (iv) any other matter referred to it.
- The share in central taxes is distributed among states based on a formula. Previous Finance Commissions have considered various factors to determine the criteria such as the population and income needs of states, their area and infrastructure, etc. Further, the weightage assigned to each criterion has varied with each Finance Commission.
