Test: Finance Commission - UPSC MCQ

Article 280 of the Constitution of India provides for a Finance Commission as a quasi-judicial body. It is constituted by the President of India every fifth year or at such earlier time as he considers necessary.

The Finance Commission consists of a chairman and four other members to be appointed by the President. They hold office for such period as specified by the President in his order. They are eligible for reappointment.

The qualifications required for the members of the Finance Commission include being a judge of a high court or one qualified to be appointed as one, having specialized knowledge of finance and accounts of the government, and having wide experience in financial matters and administration.

The Finance Commission is required to make recommendations to the President of India on matters such as the distribution of the net proceeds of taxes to be shared between the Centre and the states, the principles that should govern the grants-in-aid to the states by the Centre, and the measures needed to augment the consolidated fund of a state to supplement the resources of the panchayats and the municipalities.

The role of the Finance Commission in Centre-state fiscal relations was undermined by the emergence of the erstwhile Planning Commission, a non-constitutional and non-statutory body.

The State Finance Commission (SFC) is an institution created by the 73rd and 74th Constitutional Amendments (CAs) to rationalize and systematize State/sub-State-level fiscal relations in India.

Article 243I of the Constitution mandated the State Governor to constitute a Finance Commission every five years.

The main purpose of the State Finance Commissions is to rationalize and systematize State/sub-state fiscal relations in India.

During the 15th Finance Commission's meeting with the RBI, the key issue discussed regarding State Finance Commissions was their necessity to rationalize and systematize State/sub-state fiscal relations in India.

Some of the concerns related to State Finance Commissions include states not setting up their SFCs regularly as mandated, SFCs lacking proficiency, SFCs having a huge task of considering a large number of local governments, and SFCs facing a crucial problem of reliable data.