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FINANCE COMMISSION: HIGH LEVELS OF UNCERTAINTY

Why in news?

India’s nominal GDP growth rate in 2020-21 could range between -6% and 1%, according to members of the 15th Finance Commission’s (XV-FC) committee on the fiscal consolidation roadmap.

Details of Uncertainty

  • There are high levels of uncertainty, both with regard to the course of the pandemic and the fiscal pressures on the economy and the trend of economic recovery.
  • There was also uncertainty on whether the economy would experience a V-shaped or U-shaped recovery.
  • Nominal GDP growth does not take inflation into account, and is thus higher than real GDP growth.

XV-FC On health

  • The Fifteenth Finance Commission’s high-level group on health has now recommended an immediate beefing up of health infrastructure in areas with a cluster of positive patients, and also discussed how to address the growing needs of rural health infrastructure and manpower, especially with migrants returning from the cities often carrying the virus to their villages.
  • There is a wide disparity between the per capita health personnel available in various States.
  • In the medium term, the government’s financial outlay on the health sector must increase significantly from the current 0.9% of GDP.

Finance Commission

  • The Finance Commission (FC) is constituted by the President of India every fifth year under Article 280 of the Constitution.
  • Finance Commission is a constitutional body.
  • It was formed to define the financial relations between the central government of India and the individual state governments.
  • FC determines the method and formula for distributing the tax proceeds between the Centre and states, and among the states.
  • The Finance Commission also decides the share of taxes and grants to be given to the local bodies in states. This part of tax proceeds is called Finance Commission Grants, which is a part of the Union budget.
  • The Finance Commission (Miscellaneous Provisions) Act, 1951 additionally defines the terms of qualification, appointment and disqualification, the term, eligibility and powers of the Finance Commission.
  • The Finance Commission consists of a chairman and four other members, who are appointed by the President of India.
  • There have been fifteen commissions to date, the most recent was constituted in 2017.

Fifteenth Finance Commission

  • The Fifteenth Finance Commission (XV-FC or 15-FC) is an Indian Finance Commission constituted in November 2017 and is to give recommendations for devolution of taxes and other fiscal matters for five fiscal years, commencing 2020-04-01.
  • The main tasks of the commission were to “strengthen cooperative federalism, improve the quality of public spending and help protect fiscal stability”.
XV-FC Fifteenth Finance Commission

-Source: The Hindu

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