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Need to give permanent status to Finance Commission: RBI Governor
Why is it in the news ?
- Reserve Bank of India Governor Shaktikanta Das said “increasingly it is felt that there is a need to give permanent status” to the Finance Commission.
- He also advocated for constitution of State Finance Commissions every five years.
More in the news
- According to the RBI Governor, the Commission can function as a leaner entity in the intervening period till the next Finance Commission is set up in a full-fledged manner.
- During the intervening period, it can also address issues arising from implementation of the recommendations of the Finance Commission.
- This has become even more critical in the post GST scenario.
Finance Commission:
- The Finance Commission is a constitutional body created by the President of India under Article 280 of the Constitution, 1950.
- Its main purpose is to keep a check on the vertical and horizontal imbalances of the federal finance of India.
- Vertical imbalances refer to the imbalance between the revenue generated by the Centre and states and their expenditure needs.
- Horizontal imbalances refer to the failure of states to provide the comparable services due to their incapability to raise the necessary funds.
- It is usually constituted once in five years.
- The first Finance Commission was established in 1951.
Functions :
- Distribution of net proceeds of taxes between Center and the States, to be divided as per their respective contributions to the taxes.
- Determine factors governing Grants-in-Aid to the states and the magnitude of the same.
- To make recommendations to the president as to the measures needed to augment the Fund of a State to supplement the resources of the panchayats and municipalities in the state on the basis of the recommendations made by the finance commission of the state.
Source
Indian Express.