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New Delhi : The government on Sunday appointed former Niti Aayog vice-chairman and Columbia University professor Arvind Panagariya as chairman of the 16th Finance Commission (SFC), a constitutional body. mint Let’s take a look at what you can expect from SFC.
The government on Sunday appointed former Niti Aayog vice-chairman and Columbia University professor Arvind Panagariya as chairman of the 16th Finance Commission (SFC), a constitutional body. mint Let’s take a look at what you can expect from SFC.
What is the role of the Finance Committee?
The Finance Commission is an independent constitutional body that plays an important role in distributing the Centre’s net tax revenue between the Central and State governments, keeping in mind the fiscal needs of the States. All central taxes, other than those directed to states, and certain surcharges and levies imposed by the Center form part of this divisible tax revenue pool. The Finance Commission will decide the extent of the Center’s revenue to be shared with the states and the mode of distribution among them. The commission is an important pillar of fiscal federalism.
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What is the role of the Finance Committee?
The Finance Commission is an independent constitutional body that plays an important role in distributing the Centre’s net tax revenue between the Central and State governments, keeping in mind the fiscal needs of the States. All central taxes, other than those directed to states, and certain surcharges and levies imposed by the Center form part of this divisible tax revenue pool. The Finance Commission will decide the extent of the Center’s revenue to be shared with the states and the mode of distribution among them. The commission is an important pillar of fiscal federalism.
Why were some states unhappy?
Since resources are finite, the distribution of revenue between states is debatable. The parameters should correspond to the interests of all countries, taking into account the different stages of development. When the 15th Finance Commission was established, one of its terms of reference was to use population data from the 2011 census. Karnataka and Tamil Nadu complained that this would reduce their allocations even though they had been successful in population stabilization efforts. The panel then focused on population and “population performance” for fair distribution.
What did the Center ask the SFC to do?
The Center keeps the SFC’s terms of reference short and direct, rather than prescriptive. The committee has also been asked to suggest ways to augment the state’s consolidated fund to supplement the coffers of local bodies such as panchayats. In addition, the SFC may also establish principles for grant aid.
What challenges does SFC need to address?
Panagariya is expected to work on debt sustainability at the central and state levels. The center claims that it is on track to achieve its goal of reducing the fiscal deficit to less than 4.5% of GDP by fiscal 2026, and that general government debt will decline in the medium to long term. In addition to this, the SFC is expected to study revenue trends and expenditure obligations at the central and state levels and make recommendations. Another important area the committee is expected to consider is spending reform at the state level.
What does the average person get?
Finance committees tend to recommend higher shares of devolved funds for states with lower per capita incomes, so that they can provide public goods at the same level as other states. It also promotes the state’s fiscal performance and benefits the people. The committee will also consider the unfinished agenda of amending GST rates on some items, which is currently on the back burner due to high inflation. The SFC is also likely to take into consideration the upcoming Central Pay Commission decision.
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