Describe the functions of Finance Commission.
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Describe the functions of Finance Commission.
The Finance Commission in India is a constitutional body established under Article 280 of the Constitution. It plays a crucial role in the fiscal federalism of the country by recommending the distribution of financial resources between the Centre and the States. The primary functions of the Finance Commission include:
Distribution of Taxes: The Commission recommends the distribution of taxes and other financial resources between the Union (Central Government) and the States. It reviews the revenue needs and expenditure requirements of both levels of government.
Grants-in-Aid: It recommends grants-in-aid to be given to states from the Consolidated Fund of India. These grants are aimed at addressing the revenue gap and promoting balanced development among states.
Revenue Deficit Grants: The Finance Commission addresses the revenue deficit of states by recommending grants to meet the shortfall in their revenue accounts.
Fiscal Consolidation: It suggests measures to improve the fiscal consolidation of both the Centre and the States, ensuring financial stability and responsible fiscal management.
Any Other Matter: The Commission can be tasked with any other matter by the President, related to fiscal federalism or financial management.
The Finance Commission operates independently to assess the financial requirements and fiscal capacities of states, promoting equity and efficiency in the distribution of resources. The recommendations of the Finance Commission are crucial for maintaining a balanced and cooperative fiscal relationship between the Union and the States in India.