How have the recommendations of 14th Finance commission of India enabled the states to improve their fiscal position?

Finance Commission (FC) is a constitutional authority, constituted under Article 280, that sets the mechanismnand formula for allocating tax revenues between the Centre and states, as well as among states, in accordancebwith the Constitutional and current needs.

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%. States would receive a larger volume of untied funds relative to tied funds. This will enhance the states’ autonomy in decidingbtheir expenditure priorities.

2. Recommend eight centrally sponsored schemes (CSS) to be delinked from support from the Centre, thus,nstates sharing a higher fiscal responsibility and autonomy to implement development initiatives.

3. FFC, unlike the past Commissions, has covered the entire revenue account requirements of the States, both plan and non-plan, in its recommendations. Resulting in better allocation of resources even to panchayats and third tier of governments.

4. States got much autonomy in deciding their expenditure priority; this is in the spirit of “balancing wheel of fiscal federalism”.

5. Performance based grant in case of Municipalities (80:20) and panchayat (90:10) has resulted in efficient asset construction streamlining of election procedures in these bodies further. Also, these have been renewed focus from the state government to gain more performance-based grants from the centre.

The Finance Commission as an autonomous body has served a splendid purpose. In as complex a polity as India is, it acted as an agency to bring about coordination and cooperation in the matter of Fiscal Federalism that is so important in the working of a federal system.