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Challenges before the Fifteenth Finance Commission
The terms of reference of the Fifteenth Finance Commission are significantly different from those of earlier finance commissions. Some of these changes are within the mandate of the Constitution. Some do not appear to be so. Others appear extraneous. Some appear to urge the commission to asymmetrically treat a group of states. This article examines the challenges the XV-FC will face while addressing these changes.
The author is grateful to Indira Rajaraman for her insightful comments on an earlier version of this article.
The Fifteenth Finance Commission (XV-FC) has been appointed with the terms of reference (ToR) notified in a presidential order dated 27 November 2017. The ToR is significantly different from those of earlier finance commissions. We examine the issues arising out of these changes and review the challenges the XV-FC will face while addressing them.
Clause 3(b) of Article 280 of the Constitution is usually merged with part of Article 275 (1) and included in the ToR of a finance commission. The ToRs of the last 12 finance commissions over the past 60 sixty years did so. The words “[state] which are in need of assistance,” however, do not find place in the ToR of the XV-FC. It is not clear why this phrase has been excluded. This can be interpreted as a deliberate signal to the XV-FC to provide grants to states on grounds other than need. This exclusion meshes with two other references encountered subsequently in the ToR—one, relating to the removal of revenue deficit grants to states in need, and the other, relating to providing incentive grants to states which may not be in need.
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