India’s 16th Finance Commission: Terms of Reference Approved

India's 16th Finance Commission: Terms of Reference Approved

VoM News Desk | November 29, 2023 | 05:23 PM IST | Breaking News | Follow on Google News

India’s 16th Finance Commission: Terms of Reference Approved

India’s 16th Finance Commission: Terms of Reference Approved

The Indian government has approved the ‘Terms of Reference’ (ToR) for the 16th Finance Commission, a critical step in defining the scope and functioning of the commission. Information and Broadcasting Minister Anurag Thakur provided details about this development, which was decided at a recent Cabinet meeting.

Key Details of the 16th Finance Commission

• Duration of Recommendations: The commission’s recommendations will apply for five years, starting from April 1, 2026.
• Report Submission: The commission is set to submit its report by October 31, 2025.
• Continuation from Previous Commission: The 15th Finance Commission, constituted on November 27, 2017, covered a period of six years starting April 1, 2020. Its recommendations remain valid until the financial year 2025-26.

Functions and Objectives

• Tax Revenue Distribution: The commission will make recommendations on the distribution of tax revenues between the Centre and the states.
• Allocation among States: It will also address the allocation between states of their respective shares of tax proceeds.
• Grants-in-Aid and Panchayat Resources: The ToR includes guiding principles for grants-in-aid from the Consolidated Fund of India and suggestions to augment resources for panchayats and municipalities.

Formation and Preliminary Work

• Constitution Frequency: The Finance Commission is typically formed every fifth year, but the 15th Commission’s extended term necessitates the early formation of the 16th Commission.
• Preliminary Arrangements: An advance cell was formed in the Ministry of Finance on November 21, 2022, to handle initial preparations. A Working Group, led by the Finance Secretary, was established to assist in formulating the ToR.

Consultative Process

• The process involved seeking views and suggestions from state governments and Union Territories with legislatures. These inputs were thoroughly deliberated by the Working Group to shape the final ToR.

The 16th Finance Commission’s establishment and its comprehensive ToR are crucial for ensuring a balanced and equitable distribution of financial resources across the nation, aligning with India’s federal structure and economic goals.

VoM News Desk

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