15th Finance Commission

  • It was constituted by the President of India in November 2017, under the chairmanship of NK Singh. Its recommendations will cover a period of five years from the year 2021-22 to 2025-26.
  • The recommendations were given keeping in mind the multiple challenges. This included the dissolution of the Planning Commission, the introduction of GST, and above all the fiscal and revenue stress induced by the pandemic.

Key Recommendations:

  • Vertical devolution – 41% of the Centre’s taxes would be distributed amongst the states.
  • Horizontal devolution – It suggested 12.5% weightage to demographic performance, 45% to income, 15% each to population and area, 10% to forest and ecology, and 2.5% to tax and fiscal efforts.
  • Revenue deficit grants amounting to 2.95 lakh crore would be given to 17 states in 5 years.
  • Grants towards urban and local bodies would be conditional upon: 
    • Setting up of state finance commission
    • Online publication of Local bodies accounts
    • Sanitation and Water services provided by local bodies (60% weightage)
  • Setting up a non-lapsable defence modernisation fund for augmenting capital expenditure on defence beyond the normal budgetary allocations.
  • Taking out 1.53 lakh crore rupees from the consolidated fund of India to partly finance the defense modernisation fund.
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