It was in the year 1952 that the First Finance Commission was constituted under the chairmanship of ——1—— for the period 1952-57. The latest in this chain is the Fifteenth Finance Commission, which has performed the daunting and challenging task of submitting its report in COVID times. This is also the first ever Commission to have given recommendations spanning a period of six years, that is, 2020-26. Though the Ninth and Eleventh Commissions also came out with interim reports, the total span of the Commissions was limited to five years.

The Commission, in its final report, recommended _____2______, adjusting 1 per cent for the erstwhile state of Jammu and Kashmir. For horizontal distribution, it has tried to harmonise the principles of expenditure needs, equity and performance with the introduction of efficiency criteria of tax and fiscal efforts and by assigning 12.5 per cent weight to demographic performance, resolving the demographic debate and incentivising states for the efforts and progress made in moving towards the replacement rate of population growth.

The second core function entrusted to the Finance Commission is to determine the principles which should govern grants-in-aid, assessed on the needs of the states. The Commission has recommended a total grant of Rs 10,33,062 crore during 2021-26, broadly characterised into: (a) revenue deficit grants, (b) grants for local governments, (c) grants for disaster management, (d) sector-specific grants and (e) state-specific grants.

The Commission’s recommendation for setting up the state and national leve_____3______in line with the provisions of the Disaster Management Act, is both well-timed and necessary. For the first time, the Finance Commission has introduced a 10-25 per cent graded cost-sharing basis by the states for the NDRF and NDMF which has not been appreciated by the states.