ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Finance Commissions in a Cul-de-sac

The reports of successive finance commissions make it clear that the institution of the finance commission is progressively getting trapped in a cul-de-sac. The reports have become a ritual and for the most part have hardly anything new to contribute though the fiscal position of the states and the centre has deteriorated sharply over time. The elaborate quinquennial exercise, lasting over three years on each occasion and involving intensive discussion with all the state governments and central ministries, academics, representatives of trade and industry and other knowledgeable persons, has hardly thrown up any new idea. The successive commissions have instead merely tinkered with the percentages of horizontal distribution among the states along with effecting marginal increases in central devolution.

The report of the Eleventh Finance Commission (EFC) on the additional term of reference, given to it by the president in April 2000, was placed by the government on the table of parliament in December 2000. With it, the whole report of the EFC can now be taken up for detailed consideration.

At the outset, it must be stated that successive reports of finance commissions give an impression that they are a part of a street with a dead-end. The reports have become a ritual and in most parts have hardly anything new to say or contribute though the fiscal position of both the states and the centre has deteriorated over time considerably. Except for the Tenth Finance Commission which proposed sharing of a percentage of all tax revenues of the centre between the centre and the states, hardly any new or revolutionary idea has been thrown up in spite of the elaborate quinquennial exercises comprising intensive discussions with all states and central ministries, academics, representatives of trade and industry and other knowledgeable persons, lasting over three years on each occasion. It will be hazardous to presume that all such discussions have been sterile and have not come up with any worthwhile ideas for dealing with the critical issues at hand. The successive commissions have merely tinkered with percentages of horizontal distribution of funds between states with marginal increases in central devolution from the period of one finance commission to the other.

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