ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Fourteenth Finance Commission

Continuity, Change and Way Forward

In preparation of its report, the Fourteenth Finance Commission was guided by the terms of reference; the approach of the previous finance commissions; the prevailing macroeconomic situation in the country; and the evolving circumstances relevant to the ToR. The FFC learnt that there is much to be gained by adhering to the letter and spirit of the Constitution, and listen to and learn from stakeholders so that an appreciation can be had of the current problems. Further, the legitimacy of the finance commission in advocating policy agendas and assigning priorities should be kept in view.

This is an edited and condensed version of the Second Dr Raja J Chelliah Memorial Lecture delivered at the Madras School of Economics on 16 March 2015. The text here excludes the sections on disaster management, pricing of public utilities, public sector enterprises and public expenditure management. The complete version of the lecture can be found on the website of the Madras School of Economics. I am grateful to M Govinda Rao and Pinaki Chakraborty for their valuable comments and advice on an earlier draft. I am thankful to Deepak Narain for his valuable assistance.

1 Guiding Factors and Work Processes

The Fourteenth Finance Commission (FFC), like its predecessors, was guided by the terms of reference (ToR); the approach of previous finance commissions; the experience gained in this regard; the prevailing macroeconomic situation, in particular, the fiscal environment of the country; and the evolving circumstances relevant to the ToR. In addition, the FFC reviewed in detail the relevant deliberations in the meetings of the National Development Council, the views of the Administrative Reforms Commission (1966), National Commission on Review of the Working of the Constitution (Venkatachalaiah Commission 2002), Commission on Centre–State Relations (Sarkaria Commission 1988), Commission on Centre–State Relations (Punchhi Commission 2010), etc, to analyse union–state fiscal relations in a fundamental manner. In the process, reference to debates in the Constituent Assembly also became necessary and useful.

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