1.

What is a Finance Commission?

The Finance Commission is a body set up by the President of India every 5 years
under Article 280 of the Constitution. It consists of a Chairman and four
members. The main task of the Commission is to make recommendations about
the distribution of tax revenues between the Centre and states. For doing so, it
consults with various ministries and departments, as well as stake holders and
policy makers at the state and local government level.

2.

What is the Fourteenth Finance Commission?

The Fourteenth Finance Commission (FC-14) was constituted by the President on

2 January 2013. Dr. Y. V. Reddy was appointed as the Chairman. Three full time
members (Ms. Sushama Nath, Dr. M. Govinda Rao and Dr. Sudipto Mundle) and
one part-time member (Prof. Abhijit Sen) were also appointed. The
recommendations of FC-14 cover the five year period from 2015-16 to 2019-20.
The final report was submitted in December 2014, and made public in February
2015[1].

3.

What does the Finance Commission do?

The finance commission makes recommendations on the following:

(i) Vertical Devolution: How gross tax revenues should be distributed between
the Centre and States
(ii) Horizontal Devolution: How the states tax quota should be apportioned
between different states
(iii) The principles on which states should be given grants in aid from the
Consolidated fund of India.
(iv) How to augment the Consolidated Funds of States to add to the resources of
Panchayats and Municipalities
(v) Review the state of finances and debt levels of the Union and States and
review the fiscal consolidation process.
Of these recommendations, (i) and (ii) usually receive the most media attention
since they have an important bearing on the Centres fiscal position as well as
the flow of funds to states.