Impact of Planning Commission on Finance Commission

Q.  Which of the following is/are true regarding Planning Commission and Finance Commission?

1) Finance Commission balances fiscal federalism in India.
2) Dr. P. V. Rajamannar, the Chairman of the Fourth Finance commission asked for scrapping the Planning Commission.

- Published on 14 Mar 17

a. Only 1
b. Only 2
c. Both 1 and 2
d. None of the above

ANSWER: Only 1
    Impact of Planning Commission -

  • Finance Commission balances fiscal federalism in India.

  • But its role of in Centre - state financial relations has been reduced and weakened by Planning Commission.

  • Planning Commission is a non-constitutional and a non-statutory body.

  • Dr P. V. Rajamannar, the Chairman of the Fourth Finance commission, observed that the functions and responsibilities of both the Commissions overlap to a great extent.

  • He observed the following in his report -

    1. Setting up of the Planning Commission curtailed the scope and functions of the Finance Commission.

    2. As the entire plan, with regard to both policy and programme, comes within the purview of the Planning Commission and as the assistance to be given by the Centre for plan projects either by way of grants or loans is practically dependent on the recommendations of the Planning Commission, it is obvious that a body like the Finance Commission cannot operate in the same field.

    3. The main functions of the Finance Commission now consist in determining the revenue gap of each state and providing for filling up the gap by a scheme of devolution, partly by a distribution of taxes and duties and partly by grants-in-aid.

    4. We, therefore, recommend that in future the Finance Commission may be asked to make recommendations on the principles which should govern the distribution of plan grants to the states.

    5. While the principles governing the distribution of the plan grants will be set out by the Finance Commission, the application of these principles from year to year will be left to the Planning Commission and the Government.

    Finance Commissions Appointed -

  • Till now, 14 finance commissions have been constituted.

  • The head of the 13th was Dr. Vijay Kelkar.

  • The head of the 14th is Y. V. Reddy.

  • The 14th was appointed in 2013.

  • The period of implementation of the 14th Finance Commission is 2016-2020.

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