The Twelfth Finance Commission
The Twelfth Finance Commission (TFC), constituted under Article 280 of the Constitution of India, was tasked with recommending the principles governing the distribution of tax revenues between the Union and the States, as well as among the States themselves. It was chaired by Dr. C. Rangarajan and submitted its report in 2004, covering the period from 2005-2010. Its recommendations aimed to promote fiscal federalism, equity, and efficiency in public finances.
One of the primary concerns of the TFC was the vertical devolution of taxes. The commission recommended that the States’ share in the net proceeds of shareable central taxes be fixed at 30.5% for the period 2005-2010. This was a slight increase from the 29.5% recommended by the Eleventh Finance Commission. The rationale behind this increase was to provide States with more resources to meet their developmental needs, particularly in sectors like education and healthcare.
Regarding horizontal distribution, the TFC continued to use a formula-based approach to allocate tax revenues among the States. However, it modified the weights assigned to different criteria to better reflect the needs and performance of individual States. The formula included factors such as population, income distance, area, tax effort, and infrastructure development. Income distance, which measures the gap between a State’s per capita income and the highest per capita income among all States, continued to be a significant factor, reflecting the objective of reducing regional disparities.
A key recommendation of the TFC was its emphasis on fiscal consolidation. The Commission advocated for States to eliminate revenue deficits by 2008-09 and reduce their fiscal deficits to 3% of Gross State Domestic Product (GSDP). To incentivize fiscal responsibility, the TFC recommended a debt relief scheme for States that met specific targets for fiscal correction. This scheme involved a debt write-off based on the achievement of agreed-upon fiscal performance indicators. This encouragement of fiscal discipline was a major focus.
Furthermore, the TFC addressed the issue of local body finances. It recommended grants to local bodies based on a combination of population and area. These grants were intended to support the provision of basic services such as water supply, sanitation, and primary education at the local level. The Commission also emphasized the need for strengthening the financial management capabilities of local bodies to ensure effective utilization of these funds.
The Twelfth Finance Commission played a crucial role in shaping the fiscal relations between the Union and the States in India. Its recommendations aimed at promoting fiscal stability, reducing regional disparities, and improving the delivery of public services. The emphasis on fiscal consolidation and debt relief provided a framework for States to improve their financial health and invest in developmental priorities. While the recommendations were subject to debate and discussion, they laid a foundation for a more balanced and sustainable fiscal framework in the country.
1600×2070 finance commission composition role fc from www.pmfias.com 
700×350 finance commission apple ugc net jrf academy from www.applebacademy.com 
276×183 fifteenth finance commission gkseriescom from www.gkseries.com 
1568×882 finance commission article finance commission members from pwonlyias.com 
1568×882 finance commission article members power functions pwonlyias from pwonlyias.com 
4500×4321 fifteenth finance commission interim report recommendations upsc from www.iasexpress.net 
300×177 finance commission political science study material notes from exampariksha.com 
552×368 sixteenth finance commission upsc current affairs ias gyan from www.iasgyan.in 
1434×800 finance commission report raus ias from compass.rauias.com 
870×489 finance commission gokulam seek ias from gokulamseekias.com 
773×388 finance commission members terms reference paper tyari from www.papertyari.com 
970×545 explainer govt constitutes finance commission from zeenews.india.com )
826×465 finance commission terms reference takes conservative stance from www.business-standard.com 
1200×675 government appoints members sixteenth finance commission from www.etvbharat.com 
638×335 cracking groups finance commission recomendations from sureshtvn.blogspot.com 
1600×840 central govt appoints members sixteenth finance commission from www.taxscan.in 
581×200 fifteenth finance commission important topics upsc exams upsc from iasexamportal.com 
870×470 centre appoints manoj panda finance commission member from currentaffairs.adda247.com 
768×994 recommendations thirteenth finance commission from studylib.net )
826×465 finance commission team arrives nagaland day visit from www.business-standard.com 
1200×765 sixteenth finance commission finance commission invites from government.economictimes.indiatimes.com 
800×400 finance commission explained from www.manoramayearbook.in 
1600×840 government appoints key members sixteenth finance commission from currentaffairs.adda247.com 
720×404 finance commission constituted advisory body wisdom ias from wisdomiasonindia.wordpress.com 
1200×774 cabinet approves terms reference finance commission from thearabianpost.com 
1200×721 finance commission meets government tripura from www.5dariyanews.com 
720×485 economy lectureth finance commission tax devolution from mrunal.org 
975×568 fc holds meeting seek inputs stakeholders from www.theweek.in 
