The Finance Commission and public finance in Kerala.

Syllabus: GS-II; Subject: Polity; Topic: Federalism. Issue: Financial devolution.

Context: Asymmetric fiscal rules in Kerala spark wider debate on Centre-State financial relations.


  • Discussion focuses on debt-deficit dynamics, crucial in Centre-State financial relations.
  • Volatility in intergovernmental fiscal transfers.
  • Fifteenth Finance Commission’s tax transfer formula raises debate on equity versus efficiency.
  • Negotiations with Sixteenth Finance Commission critical for specific-purpose transfers addressing State-specific issues.

Prelims Connect:(Institutions in news)

 Finance Commission:

ü  Constitutional body advising on tax revenue distribution among Union and States.

ü  Constituted by the President under Article 280 of the Constitution.

ü  Mandated to recommend:

o   Distribution of tax proceeds between Union and States.

o   Principles for grants-in-aid to States from Consolidated Fund.

o   Measures to enhance State resources for local bodies.

o   Other financial matters referred by the President.

ü  Composition: A Chairman and four members appointed by the President.

ü  Tenure determined by the President, with eligibility for reappointment.

ü  Recommendations not binding on the government.


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