Recommendations of the 14th Finance Commission

1) The 14th Finance Commission is of the view that tax devolution should be the primary route for transfer of resources to the States.

2) In understanding the States’ needs, it has ignored the Plan and non-Plan distinctions

3) According to the Commission, the increased devolution of the divisible pool of taxes is a ``compositional shift in transfers’’ – from grants to tax devolution

4) In recommending an horizontal distribution, it has used broad parameters – population (1971), changes in population since then, income distance, forest cover and area, among others.

5) It has recommended distribution of grants to States for local bodies using 2011 population data with weight of 90 per cent and area with weight of 10 per cent

6) Grants to States are divided into two

7) One, grant to duly constituted gram panchayats

8) Two, grant to duly constituted municipal bodies

9) And, it has divided grants into two parts

10) A basic grant, and a performance one for gram panchayats and municipal bodies

11) The ration of basic to performance grant is 90:10 for panchayats; and 80:20 for municipalities

12) The total grant recommended is Rs. 2,87,436 crore for a five-year period. Out of which, the grant to panchayats is Rs.2,00,292 crore. And, the reminder goes to municipalities

13) The Commission has significantly departed from previous commission vis-à-vis recommendation of the principles governing grants-in-aid to the States by the Centre

14) It has chosen to take the entire revenue expenditure for this purpose. Hence, it has decided to take into account a state’s entire revenue expenditure needs without making a distinction between plan and non-plan expenditure

15) The Commission is of the view that sharing pattern in respect to various Centrally-sponsored schemes need to change. It wants the States to share a greater fiscal responsibility for the implementation of such schemes.