16th Finance Commission

Source: PIB
GS II: Appointment to various Constitutional posts, powers, functions and responsibilities of various Constitutional Bodies

Overview

1. News in Brief
2. Finance Commission
3. 16th Finance Commission

Why in the News?

The Union Cabinet approved the creation of three posts at the level of Joint Secretary

News in Brief

• Two posts of Joint Secretary and one post of Economic Adviser for the 16th Finance Commission.
• It was constituted in pursuance of Article 280 of the Constitution.
• The newly created posts are required to assist the Commission in carrying out its functions.
• All other posts in the Commission have already been created as per the delegated powers.

Finance Commission

As per the clause (1) of article 280 of the Constitution, the Finance Commission is to be constituted every fifth year or earlier.

• Finance Commission is a constitutional body.
• The Finance Commissions are commissions periodically constituted by the President of India under Article 280 of the Indian Constitution.
• To define the financial relations between the central government of India and the individual state governments.
• Founded: 22 November 1951
• Headquarters: New Delhi
• The Finance Commission normally takes about two years to make their recommendations.
• As the recommendations of the 15th FC cover the six years up to 31st March 2026, the 16th FC is proposed to be constituted now.
• This will enable the Finance Commission to consider and appraise the finances of the Union and the States for the period immediately, preceding the period of its recommendations.

16th Finance Commission

• The Advance Cell of the 16th FC was formed in the Ministry of Finance on 21.11.2022, to oversee preliminary work, pending formal constitution of the Commission.
• Arvind Panagariya has been appointed as the Chief of the commission with the main task of determining revenue sharing between Central Government and State Government for a period of five years from April 1, 2026.
• Ritvik Ranjanam Pandey who is currently the joint secretary in the Ministry of Finance will be secretary to the commission.
• The tenure of each Finance Commission is five years.

Terms of Reference for the Sixteenth Finance Commission

• The distribution between the Union and the States of the net proceeds of taxes which are to be, or maybe, divided between them under Chapter I, Part XII of the Constitution and the allocation between the States of the respective shares of such proceeds;
• The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the sums to be paid to the States by way of grants-in-aid of their revenues under Article 275 of the Constitution for purposes other than those specified in the provisos to clause (1) of that article.
• The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State based on the recommendations made by the Finance Commission of the State.

Article 280

(1) The President shall, within two years from the commencement of this Constitution and thereafter at the expiration of every fifth year or at such earlier, time as the President considers necessary, by order constitute a Finance Commission which shall consist of a Chairman and four other members to be appointed by the President.

(2) Parliament may by law determine the qualifications which shall be requisite for appointment as members of the Commission and the manner in which they shall be selected.

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