Finance Commission is constituted by the President under Article 280 of the Constitution, mainly to give its recommendations on the distribution of tax revenues between the Union and the States and amongst the States themselves.
Recommendations of the 14th Finance Commission, enabling fiscal position of states
1. Increased devolution to states from the divisible pool of taxes from 32% to 42% [drastic change]
States would receive a larger volume of untied funds relative to tied funds. This will enhance the states’ autonomy in deciding their expenditure priorities.
2. Asked Centre to reduce conditional grant-in –aids to states;
3. Recommend eight centrally sponsored schemes (CSS) to be delinked from support from the Centre, thus, states sharing a higher fiscal responsibility and autonomy to implement development initiatives.
4. States got much autonomy in deciding their expenditure priority; this is in the spirit of “balancing wheel of fiscal federalism”
5. Given due consideration to the fiscal federalism framework in India by devolving a larger amount to local governments.