Finance Commission

A constitutional body established under the provisions of the Indian Constitution to define the financial relations between the Union government and the State governments.

Why it matters

Acts as a balancing wheel of fiscal federalism by recommending the distribution of net proceeds of taxes between the Centre and the States.
Determines the principles governing the grants-in-aid to the States out of the Consolidated Fund of India.
Suggests measures to augment the Consolidated Fund of a State to supplement the resources of local bodies based on recommendations made by State Finance Commissions.
Ensures transparency and equity in the transfer of resources to address vertical and horizontal fiscal imbalances.

How it is asked

Focus on the constitutional mandate under Article 280, the criteria used for horizontal devolution, and the role of the commission in strengthening cooperative federalism.

In the syllabus

In the news

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