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Finance Commission Of India
Establishment of Finance Commission of India in 1951 was an important step by the Government to enforce Article 280 of Indian Constitution as part of an important role to enrich the country’s economy. The purpose of establishing this Commission was mainly to evaluate and define finance related relations between the Central and respective state governments.
According to Finance Commission Act of 1951, Finance Commission of India was to be established through assessing the need, qualifications, disqualifications for the appointment of Core Committee of Commission by keeping in view related aspects such as each Commission’s term, power and role as an important body.
Constitution of India approves for the appointment of Finance Commission of India every five years for a team comprising of Commission’s Chairman and four key members to work according to roles defined by the law. This Commission has by now suggested many recommendations ever since first Commission was set by keeping in view drastic changes in India’s economy. Such recommendations have been implemented over the period with five yearly Commission appointments.
Need of Finance Commission
By now Indian government has appointed thirteen Finance Commissions who have played crucial roles and submitted reports to Central Government over the period.
As a democratic governance system, India witnessed many political and economic ups and downs. Cases of economic imbalances were there due to differences in the system of governance with Central and states. The law of the country bounds the states to take certain important responsibilities for sustainable growth of country with the view to strengthen economy. States are advised to incur expenditures and balance sources of avenues for that Finance Commission of India play major role.
Centre and State Financial Relations
One of the important roles of Finance Commission of India is to evaluate multiple factors related to states concerned by keeping in consideration historic background of states and union territories. This Commission takes crucial steps to evaluate the resource endowments differences if any and crosscheck imbalances if they occur.
Indian constitution bounds Finance Commission of India to look into affairs of the Central and state governments in terms of financial issues by proper recognition of factors. This Commission has made several key provisions to ensure gaps between the Central and state governments are bridged through effective solutions. Issues are handled under following laws:-
Article 268 facilitates levying Center’s duties while states equip for retention
- Articles 269, 270, 275, 282 and 293 are meant to specify various ways to share resources between Centre and State governments
- Constitution of India also offers institutional framework for Centre-State transfer facilitation
The president constitutes Finance Commission of India for a tenure of five years with process of appointing a Chairman besides four core members to discharge its duties. Indian parliament has been given power to assess required qualification of the team to be appointed as integral members of Commission. Law permits the parliament to initiate selection procedure as far as appointing Commission members is concerned.
Finance Commission of India plays important advisory role on financial issues. This Commission offers many recommendations to country’s president with the view to make framework about taxes net proceed distribution between Central and State governments besides their proper allocation to the states concerned. Financial relations between Centre and state governments are well defined through it. One more important role of this Commission is to deal with devolution process of those resources coming under non-plan revenues.
Important functions of Finance Commission of India have been determined clearly and are listed accordingly:-
- It distributes tax net proceeds between Center and State governments
- Assuring such divisions between Centre and States held on the basis of tax contribution
- Decision for determining all aspects and factors related to proposed grants or aids to state and their levels
- Coordination with state level Finance Commissions to advise them of many measures to apply for required fund allocation or any extra resource
Finance Commission of India has been enacted by law under Finance Commission (Miscellaneous Provisions) Act, 1951 which guides for making structured format of the Commission. The aim is to make this Commission at par and best one in the world. It strictly follows the law in making rules and to implement them.
Selection of Finance Commission of India Chairman is done after rigorous search of experts from public affairs department. A person having versatile experience in that area is chosen for this role. Rest four members of this Commission are also selected through keeping in view the following factors:-
- Qualification level must equal to that of a High Court Judge
- A person with vast knowledge of government accounts or finances
- Those with financial expertise and keen sense of administration
- One having attained good knowledge of economics or related field
Finance Commission of India has been given special powers to determine and follow their system under the law. This Commission has been given power of a civil court according to the Court of Civil Procedure, 1908 Act. It also has power to summon or enforce attendance of witnesses if there are any or order individuals concerned if it seeks any information or detail.
The Commission has been given power to demand or ask for producing documents or public record from government offices or courts at any stage. Its powers equal o that of civil court for purposes of Sections 480 and 482 and the Code of Criminal Procedure, 1898 under Indian law.
Commission Member Disqualification
Any Finance Commission of India member can be disqualified due to some reasons including one turning mentally unsound or going insolvent. A member may also be disqualified if gets convicted of immoral offence. Likewise if one’s financial interests makes it impossible for Commission’s functioning then one is disqualified.
Members can be reappointed upon completion of one team according to order of president. Provisions made by the Central government remain key aspect for the salaries or allowances paid to Finance Commission of India members.