15th Finance Commission

Context:

● Recently, the Fifteenth Finance Commission chairman NK Singh said that concurrent list, 7th Schedule and Article 282 required holistic review.

Probable Question:

1. Discuss the need to review the concurrent list, 7th Schedule and Article 282.

Need for the Holistic review of concurrent list, 7th Schedule and Article 282:

● To reinforce trust in fiscal federalism.

● To give more flexibility to States in implementing centrally-sponsored schemes:- India needs a far more credible policy for rationalisation of Centrally Sponsored Schemes and Central outlays than has been possible so far.

➢ The total public outlays on the CSS are close to Rs 6-7 lakh crore per annum with the Centre’s share over Rs 3.5 lakh crore or 1.2% of current GDP.

➢ There are approximately 211 schemes/sub-schemes under the 29-umbrella core and core of the core schemes.

● Fiscal consolidation: There is a need for continuity on aligning the fiscal consolidation road map of the Centre and the states in more harmonious symmetry.

➢ A differentiated debt path of states which recognises the present constraints and issues of legacy debt must be handled with sagacity and sensitivity.

➢ The Centre recently allowed additional borrowing space of 2% of GDP for states this year (over and above 3% mandated under FRBM) based on reforms in four areas — universalisation of one nation-one ration card, ease of doing business, power distribution and urban local body revenues.

➢ A fiscal range than a fiscal point based on expenditure outcomes may be the need of the hour

● The symmetry in the work of the GST Council and the Finance Commission deserves serious consideration.

➢ The Finance Commissions look at projections of expenditure and revenue, but issues of GST rates exemptions, changes, and implementation of the indirect taxes are entirely within the domain of the GST Council.

➢ This leads to unsettled questions on the ways to monitor, scrutinise and optimise revenue outcomes.

● With the abolition of the Planning Commission, many economists and policymakers have argued about an institutional vacuum.

➢ We need to give serious consideration to a consultative forum for credible policy dialogue between the Centre and the States.

● Erosion of division of power: The division of functions enshrined under the Seventh Schedule of the Constitution got increasingly eroded over a period of time, beginning with

➢ the constitution of the Planning Commission in 1951 and later,

➢ the shifting of the subjects like forest and education from the state to the Concurrent List by the 42nd Amendment of the Constitution

● Some examples in today’s context are the Mahatma Gandhi National Rural Employment Guarantee Act of 2005 and the National Food Security Act 2013.

Conclusion:

The commission on Centre-State Relations, headed by Justice M M Punchhi, in 2010 recommended that the Union should only transfer those subjects into the Concurrent List, which are central to achieving demonstrable national interest.