Fifteenth_Finance_Comission

To put this in historical perspective, we note that the type and size of grants-in-aid have varied over a period of time. There have been five different types of grants: (a) revenue deficit grants, (b) grants for local governments, (c) grants for disaster management, (d) sector-specific grants and (e) State-specific grants. Except for the revenue d

We have, therefore, proposed a scheme of allocation of resources across States, that takes into account both their development needs as well as past performance, where the latter aims to incentivise better performance, and to allocate resources where they can be used most effectively. Specifically, our newly introduced parameter of 'demographic per

The Commission was tasked not only with determining the distribution between Union and States of the net proceeds of taxes, but also reviewing and commenting on the design of fiscal principles for various grants that are typically provided alongside revenue shares. We were, in particular, asked to consider performance-based incentives to support an

Chapter 1 : Introduction

considering the severity of our lockdown, in many ways, this compares somewhat favourably to many other countries which did not have such a severe lockdown, but equally experienced a sharp contraction during this period such as the United Kingdom, the United States and Brazil.

The distinction between revenue and capital accounts is, in fact, rooted in the history of budget making process, and in the Constitution of India. Revenue deficit grants emanate from the requirement to meet the fiscal needs of the States on their revenue accounts that remain to be met, even after considering their own tax and non-tax resources and

e traditional mandate of the Finance Commission to allocate revenues across levels of government, but also to put in place and reinforce the structures, habits and building blocks to increase our adaptability as a nation, a Union of States, and a partner in a more sustainable global trajectory for human development.

In order to further empower local governments, the Commission recommends substantially enhanced resources available to them, compared to any earlier periods. In line with the overall spirit of this report to create a balance between needs and performance, the allocation of funds to local governments is generally linked to certain performance criter

In practice, except for the revenue deficit grants, the actual flow of funds remained generally less than recommended amounts by the end of the award period, which indicates that the revenue deficit grants were predictable and assured while others were not. Some conditional grants for local governments faced challenges of conditionalities and timel

We therefore decided to include many of the results of our work with key Ministries/Departments in a separate volume. Thus, Volume III of the Report covers the essence of our work on the key Ministries/ Departments which may be insightful for the readers.