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Has the Union Been Fair to States?

Finance Commission Report for 2020–21

The action taken by the union on some of the recommendations of the Fifteenth Finance Commission for 2020–21 is indicative of a major departure from the established practices followed so far. Asking the Finance Commission to review its recommendations on special grants to three states, and grants for nutrition to all the states is totally unprecedented and undermines the stature of the institution of the Finance Commission.

The much awaited Report of the Fifteenth Finance Commission for the Year 2020–21 was placed in Parliament on 1 February 2020 by the union finance minister along with the explanatory memorandum as to the action taken on the recommendations made by it. The Fifteenth Finance Commission has continued with the approach of the previous commissions in recommending tax devolution, post-devolution revenue deficit grants, grants to local bodies and the centre’s contribution to the States’ Disaster Response Funds. With the change in the status of Jammu and Kashmir from being a state to a union territory and the notional share of the erstwhile state being estimated at 0.85% of the divisible pool of union taxes, the aggregate share of the states in the divisible pool has been reduced from 42% to 41%. Though the commission has been mandated by one of the terms of reference (ToR) to examine whether revenue deficit grants be provided at all, the Fifteenth Finance Commission has done the right thing by recommending revenue deficit grants.

The only departures from the Fourteenth Finance Commission are the recommendations relating to special grants and grants for nutrition. This article examines whether the union has been fair to the states in its acceptance and implementation of the recommendations of Fifteenth Finance Commission for 2020–21.

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Updated On : 21st Mar, 2020

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