[feb]15th Finance Commission’s interim report

Question 1

what?

Answer 1

recommend measures and methods on how revenues, which the government earns through various taxes, need to be distributed between the Centre and the states.

Question 2

appointed by

Answer 2

prez

Question 3

Changes introduced by 15th FC?

Answer 3

The 15th Finance Commission has recommended reducing states share by 1% from Centre’s divisible pool to 41% in 2020-21 as against 42%
The one percentage point cut has come on account of the re-organisation of the erstwhile State of Jammu & Kashmir.

Question 4

Weightage change?

Answer 4

• Population of a State : 15%(from 17.5%)
• Weight for demographic performance : 12.5%(from 10%)
• Income Distance (difference of a state’s per capita income from that of the state with the highest per capita income): 45%(from 50%)
• “Tax Effect”: The 15th FC report has introduced a new criteria, the “tax effect”, for states, with 2.5% weightage.

Question 5

provisions related to Local Bodies?

Answer 5

The commission’s effort to improve the granularity in devolution to local bodies has generated some interesting results.

Urban local bodies, especially municipalities in cities with populations of more than one million, are set to get a larger share of the pie.

Question 6

other Recommendations

Answer 6

• suggested that the country needs an overarching fiscal framework for Centre as well as states, on the lines of the FRBM Act, which would lay down accounting, budgeting and auditing standards to be followed at all levels of the government.
• critical of the Union and State governments’ tendency to finance spending through off-budget borrowings and via parastatals.