Continuity with Change: Approach of the Fifteenth Finance Commission
Publication dateAug, 2021
DetailsNIPFP Working Paper No. 342
AuthorsAjay Narayan Jha
The two latest Finance Commissions – the Fourteenth Finance Commission (FC-XIV) and the Fifteenth Finance Commission (FC-XV)– mark a break from the past. The paper explores the structural shift in federal finances with the abolition of the Planning Commission and contemporaneous circumstances that shaped the approach of the FC-XV and examines the intersections and divergence, continuity and change, with FC-XIV in terms of its treatment of and approach to the three core issues of vertical and horizontal devolution, grants-in-aid to the States and transfers to local governments. It argues that the pervasive impact of the pandemic has shaped the recommendations of FC-XV in several ways without compromising on the Constitutional principles and retaining the balance in federal transfers between the Union and the States and amongst the States. At a time when the growth prospects of the economy are uncertain, innovative use of targeted grants linked to performance-based criteria for specified sectors through the States and local governments address glaring gaps in public services and potentially trigger reform in critical sectors.