The Finance Commission, a constitutionally mandated body in India, plays a crucial role in defining the financial relations between the Union and State governments. Its primary responsibility is to recommend principles governing the distribution of tax revenues between the Centre and States, and the allocation of these revenues among the States. The commission also recommends measures to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities. Over the years, twelve Finance Commissions have submitted their reports, each contributing to the evolution of fiscal federalism in India. Here’s a brief overview of their chairmen:
- K.C. Neogy (1st Finance Commission, 1951): Neogy, a veteran politician, headed the inaugural commission. His recommendations laid the foundation for the principles of fiscal devolution, emphasizing population as a key determinant in revenue sharing.
- K. Santhanam (2nd Finance Commission, 1956): Santhanam, a freedom fighter and parliamentarian, refined the principles established by the first commission. He introduced the concept of collection cost as a factor in revenue distribution.
- A.K. Chanda (3rd Finance Commission, 1961): Chanda, a former Comptroller and Auditor General of India, further elaborated on the principles of tax devolution. His commission suggested grants-in-aid for States to cover their non-plan revenue deficits.
- P.V. Rajamannar (4th Finance Commission, 1965): Rajamannar, a judge, focused on resource mobilization by the States and emphasized the need for greater fiscal discipline.
- Mahavir Tyagi (5th Finance Commission, 1969): Tyagi, a politician, considered the impact of centrally sponsored schemes on state finances. He recommended enhanced grants-in-aid to cover the revenue gaps of States.
- K. Brahmananda Reddi (6th Finance Commission, 1973): Reddi, a former Chief Minister, considered the impact of inflation and the rising costs of social services. He emphasized the need for equitable distribution of resources, particularly to address the needs of poorer states.
- J.M. Shelat (7th Finance Commission, 1978): Shelat, a former Supreme Court judge, focused on the financing of relief expenditure related to natural calamities. He recommended a higher share of central taxes for the States.
- Y.B. Chavan (8th Finance Commission, 1984): Chavan, a seasoned politician and former Union Minister, addressed the issue of interstate disparities. His report also reviewed the system of financing relief expenditure and recommended greater autonomy for States.
- N.K.P. Salve (9th Finance Commission, 1988): Salve, a politician, introduced the concept of normative assessment of revenues and expenditures, aiming to promote efficiency and fiscal discipline among the States.
- K.C. Pant (10th Finance Commission, 1995): Pant, a politician and former Union Minister, continued the emphasis on normative assessment. The commission also addressed the challenges posed by economic liberalization and globalization.
- A.M. Khusro (11th Finance Commission, 2000): Khusro, an economist, emphasized the importance of fiscal consolidation and recommended measures to improve the quality of public spending. He advocated for a more transparent and rule-based system of fiscal transfers.
- C. Rangarajan (12th Finance Commission, 2005): Rangarajan, a former Governor of the Reserve Bank of India, focused on debt sustainability and fiscal responsibility. He recommended a restructuring of State government debt and emphasized the need for improved tax administration.
Each of these chairmen, through their respective commissions, contributed significantly to shaping the fiscal landscape of India, balancing the needs of the Union and States while promoting economic growth and equitable development.
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