Union Finance Commission : Composition And Functions

access_time February 9, 2024
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INTRODUCTION

The Union Finance Commission is a constitutional body set up by the President of India every five years under Article 280 of the Indian Constitution. The commission is responsible for recommending the distribution of taxes and other financial resources between the central government and the state governments of India.

The commission is composed of a chairman and four other members who are appointed by the President of India. The chairman is usually a person with experience in public finance, while the other members are usually experts in fields such as economics, taxation, and fiscal policy.

COMPOSITION

The Union Finance Commission of India is composed of a chairman and four other members. Let's take a closer look at each member's role and qualifications:

  1. CHAIRMAN : The chairman of the commission is usually a person who has significant experience in public finance. The chairman is responsible for leading the commission and ensuring that its recommendations are based on sound principles of fiscal policy. The chairman is appointed by the President of India.
  2. FOUR OTHER MEMBERS : The commission also includes four other members who are appointed by the President of India. These members are experts in fields such as economics, taxation, and fiscal policy. They work with the chairman to review the financial position of the central and state governments and make recommendations on the distribution of taxes and other financial resources.

Overall, the composition of the Union Finance Commission is designed to ensure that it has a balanced and diverse group of experts who can provide objective and informed recommendations on fiscal policy in India. The members are appointed for a term of five years and can be reappointed for additional terms.

FUNCTIONS

The Union Finance Commission of India is responsible for several functions related to fiscal policy and resource allocation. Let's take a closer look at each of these functions:

  1. RESOURCE MOBILISATION : The commission is responsible for reviewing the financial position of the central and state governments and making recommendations on how to mobilize resources. This includes suggestions on how to increase revenue, reduce expenditure, and improve the overall fiscal health of the government.
  2. FINANCIAL TRANSFERS : The commission is responsible for recommending the distribution of taxes and other financial resources between the central government and the state governments of India. This includes suggestions on how to allocate resources among different states based on their needs and capacity to raise revenue.
  3. FISCAL CONSOLIDATION : The commission also advises the central government on fiscal consolidation measures to improve the fiscal health of the country. This includes recommendations on fiscal policy, debt management, and other measures to reduce the fiscal deficit and promote fiscal sustainability.
  4. GRANTS-IN-AID : The commission can recommend grants-in-aid to states that require additional resources for specific purposes. These grants are given to support the development of infrastructure, social welfare programs, and other projects that are deemed essential for the overall growth and development of the country.
  5. DISTRIBUTION OF TAXES : The commission recommends the distribution of taxes between the central government and the state governments. It ensures that the distribution of taxes is fair and equitable, taking into account the needs of different states and their capacity to raise revenue.

Overall, the Union Finance Commission plays a crucial role in ensuring a balanced distribution of financial resources between the central and state governments, and in promoting fiscal federalism in India. Its recommendations are not binding on the government, but they are given serious consideration and are an important factor in shaping fiscal policy in the country.

CONCLUSION

In conclusion, the Union Finance Commission is a constitutional body that plays a critical role in promoting fiscal federalism in India. The commission is responsible for recommending the distribution of taxes and other financial resources between the central and state governments of India, and for advising the central government on fiscal policy and consolidation measures. Additionally, it can recommend grants-in-aid to states that require additional resources for specific purposes.

The commission's recommendations are not binding on the government, but they are given serious consideration and are an important factor in shaping fiscal policy in the country. The composition of the commission ensures that it has a balanced and diverse group of experts who can provide objective and informed recommendations on fiscal policy and resource allocation in India.

Overall, the Union Finance Commission plays a crucial role in ensuring a balanced distribution of financial resources and promoting fiscal sustainability in India. Its work is essential to support the development of infrastructure, social welfare programs, and other projects that are essential for the overall growth and development of the country.

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