Finance Commission of India
| Agency overview | |
|---|---|
| Formed | 22 November 1951 |
| Jurisdiction |
 Government of India
|
| Headquarters | New Delhi |
| Agency executives |
|
| Website | http://fincomindia.nic.in/ |
The Finance Commission came into existence in 1951. It was established under Article 280 of the Indian Constitution by the President of India. It was formed to define the financial relations between the centre and the state. The Finance Commission Act of 1951 states the terms of qualification, appointment and disqualification, the term, eligibility and powers of the Finance Commission. As per the Constitution, the commission is appointed every five years and consists of a chairman and four other members. Since the institution of the first finance commission, stark changes have occurred in the Indian economy causing changes in the macroeconomic scenario. This has led to major changes in the Finance Commission's recommendations over the years. Till date, Fourteen Finance Commissions have submitted their reports.
The Indian State, like all other federations, is also ridden by the problems of Vertical and Horizontal Imbalances. Explaining vertical Imbalances result because states are assigned responsibilities and in the process of fulfilling those that they incur expenditures disproportionate to their sources of revenue, Dr. B.R. Ambedkar,the then incumbent Law minister, established the Finance Commission of India. This is because the states are able to gauge the needs and concerns of their people more effectively, and hence, are more efficient in addressing them. Factors like historical backgrounds, differences in resource endowments etc. lead to widening Horizontal Imbalances. Thus, as he has enshrined in the Constitution of India, in recognition of these two problems, Dr. Ambedkar has made several provisions to bridge the gap of finances between the Centre and the States. These include various articles in the constitution like Article 268, which facilitates levy of duties by the Centre but equips the states to collect and retain the same. Similarly, there are Articles 269, 270, 275, 282 and 293 all of which specify ways and means of sharing resources between Union and States. Apart from the above- mentioned provisions, The Indian Constitution provides an institutional framework to facilitate Centre- State Transfers. This body is the Finance Commission, which came into existence in 1951, under Article 280 of the Indian Constitution, which states:
Recently fourteenth finance commission is constituted under the chairmanship of Y.V. Reddy,former RBI Governor.
With the objective of giving a structured format to the Finance Commission of India and to bring it at par with world standards, The Finance Commission (Miscellaneous Provisions) Act, 1951 was passed. It lays down rules regarding qualification and disqualification of members of the Commission, their appointment, term, eligibility and powers.
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