GS Question

The recommendations of the 14th Finance Commission of India have enabled the states to improve their fiscal position in several ways:

1. Increased share in central taxes: The Finance Commission recommended an increase in the share of states in the divisible pool of central taxes from 32% to 42%. This higher allocation of funds has provided states with greater resources to address their developmental needs and improve their fiscal position.

2. Grant-in-aid: The Commission also recommended an increase in the grant-in-aid to states from the center. This additional financial assistance has helped states in implementing various schemes and projects, thereby improving their fiscal health.

3. Flexibility in fund utilization: The Commission emphasized the importance of giving states greater flexibility in utilizing the funds, reducing the number of centrally sponsored schemes, and streamlining the process of fund transfer. This has allowed states to prioritize their expenditure based on their unique requirements, leading to better fiscal management.

4. Revenue deficit grants: The Finance Commission recommended providing revenue deficit grants to those states that face a revenue shortfall due to various reasons. This has been particularly beneficial for states struggling with revenue deficits, as it helps them maintain a stable fiscal position.

5. Incentives for efficient fiscal management: The Commission laid emphasis on rewarding states that achieved efficiency in resource mobilization, expenditure management, and implementation of programs. This incentivized states to focus on better fiscal management practices and ultimately improved their fiscal positions.

6. Focus on capacity building: The Commission recommended capacity building initiatives and the use of technology for better financial and budgetary management. This has helped states improve their fiscal discipline and strengthen their overall financial management systems.

Overall, the recommendations of the 14th Finance Commission have provided states with increased financial resources, flexibility, and incentives to improve their fiscal position. This has empowered the states to plan and implement development projects effectively, leading to better economic growth and overall progress at the state level.