Fifteenth Finance Commission

• The Fifteenth Finance Commission has submitted its recommendations for 2020–21 and is expected to submit another report recommending award for the period from 2021–22 to 2025–26 in early November 2020.
• The Fifteenth Finance Commi­ssion award thus will cover a six-year period instead of five years.

Key-highlights

• The extension of the commission’s term by almost a year is a bit unusual.
• Probably, this had to be done due to various uncertainties which were beyond the control of the commission.
• The most critical one is the macroeconomic uncertainty characterised by a steady decline in investment and savings rates, increasing unemployment, stressed banking sector assets and declining revenue res­ources to finance development spending.
• Second, goods and services tax (GST) revenues have been subdued and the information technology infrastructure to enable its smooth transition.
• Third, ­the bifurcation of Jammu and Kashmir (J&K) into two union territories on 5 August 2019 required the commission to treat this development in a way that required detailed review and extra time.
• Fourth, the commission was given an additional point in its terms of reference (ToR) to examine whether a separate non-lapsable fund can be created for defence and internal security.
• Finally, the election code of conduct due to the Lok Sabha election in May 2019 also affected the commission’s work.

What are Finance Commissions?

• The Finance Commissionsare periodically constituted by the President of India under Article 280.
• The First Commission was established in 1951 under the Finance Commission (Miscellaneous Provisions) Act.