Question Q.5CommentGS2GS2

'The recommendations of the 15th Finance Commission have enabled the States to improve their fiscal conditions.' Comment.

Introduction

15th Finance Commission FC had tenure of 2020-25 and operated under provisions of Art. 280, 281 of Constitution.

18 words

Main Body

Recommendations of 15th FC 1) Vertical devolution = 41% of divisible pool of taxes 2) 1% devolution to Defence Fund for CAPF, Armed Forces (Naivedyam Suraksha Kosh) 3) Revenue deficit grants of ₹2.6 lakh crore to 17 states 4) Performance based grants to sectors (Healthcare, education, Agriculture etc) to tune of ₹1.3 lakh crore 5) Fund allocation to National Disaster Response Fund NDRF

6Established Millennium Cities Challenge Fund for sustainable urbanisation 7) GST rationalisation to 3 slabs. Enabled states to improve fiscal conditions:- 1) Reduced Fiscal Deficit to 3% of GDP (RBI report 2023) 2) To compensate for reduction in vertical devolution by 1% → Revenue deficit grants. 3) Improved disaster response via SDRF contribution. Challenges 1) Horizontal inequity (Bihar got ₹7 for ₹1 contributed while Maharashtra ₹0.08) 2) Rising Revenue deficit of wealthy states (13%)

137 words1 paragraphs

Conclusion

16th FC has responsibility for equitable resource allocation and ensuring fiscal federalism.

12 words

Diagram

Flow diagram showing 'Challenges' with two branches: Horizontal inequity and Rising Revenue deficit

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Page 11

Topper

Madhvendra Pratap Singh

AIR 1532025

Subject & Paper

GS2GS2

Topic

Federal Structure - Functions, Responsibilities, Devolution of Powers and Finances

Centre-State Financial Relations

15th Finance Commission Recommendations

Writing Stats

167

Total words

Paragraphs

analytical

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