sqrrl blog-15th finance commission of india

Cool title, but what’s the news?

Although the Government notified us about the 15th Finance Commission on 27th November, 2017, it has to tread a long path. It will have to fight with the slowdown in the Indian Economy, which wouldn’t be an easy nut to crack. Also, the 15th Finance Commission has the liability of equalising, or at least reducing the increasing gap between richer states and the low-income states. 

? Okay, so what does it mean? 

If we look into the vertical balances to the states relative to the Centre’s gross revenue, receipts tend to show a rise in trend in every Finance Commission. Henceforth, it would not be feasible to lessen the devolution without a corresponding increase in fiscal and revenue deficits of the states. The elevated devolution under the 14th Finance Commission have seen marginal increases in social sector allocations. Therefore, there are pressures to increment allocations to the centrally sponsored schemes (CSS) for higher expenditure on health and education. For the 15th Finance Commission, GST will provide higher tax buoyancy by summoning a large number of new tax payers. Higher tax collections under GST will provide the Union government room for a financial movement to fund the inter-governmental transfer system.

? I get it, now tell me why should I care?

The bigger picture

The inter-governmental transfer system has tend to become increasingly complex with different sharing methods for different taxes;” the spending autonomy of the states, combined with their ability to borrow, has obstructed efforts at consolidating public finances”. Now all we have to do is to wait and watch to see when The 15th Finance Commission comes into force and whether it meets our expectations!

For you personally: 

Despite of these remarkable milestones, the hurdles are not less. The resource requirements of the power sector remain escalated. In some states, the financial deficit with power sector allocations have jumped to around 9 percent. The public debt dynamics, which is getting worse due to the needs of the power sector’s restructuring would create problems for the 15th Finance Commission. An alternate fiscal situation would be required to be considered to restrict the on-budget financial deficits to 3 percent by involving the power sector.

All in all, the “15th Finance Commission will review the current scenario of the funds, deficit, debt levels, cash balances and fiscal discipline efforts of the Union and the states and recommend a fiscal consolidation roadmap for sound fiscal management, taking into account the responsibilities of the central and state governments.” Whether it would be able to cope up with it’s expectations or no, is still an unanswered question.

Source: Economic Times

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