The Finance Commission allocates resources between the central and state governments. On what basis are these allocations determined? Should socio-economically backwards states receive special packages beyond these allocations?

Topic: Inclusive growth and issues arising from it.

Topic: Inclusive growth and issues arising from it.

Q5. The Finance Commission allocates resources between the central and state governments. On what basis are these allocations determined? Should socio-economically backwards states receive special packages beyond these allocations? (250 Words)

Difficulty level: Moderate

Reference: Insights on India, TH

Why the question: In the run-up to the Union Budget, Bihar’s Nitish Kumar and Andhra Pradesh’s Chandrababu Naidu have demanded special financial packages for their states, potentially increasing the fiscal burden on the Centre and other states. Key Demand of the question: To write about the role of the Finance Commission, its allocation criteria and demands by states. Structure of the answer: Introduction: Begin by giving the context of the issue Body: In the first part, write about the role of the Finance Commission – financial needs and capacities of the central and state governments, promoting economic development, and ensuring that resources are distributed equitably for the benefit of the entire nation. In the next part, mention the criteria followed by 15th FC. Next argue whether demands by states are justified or not Conclusion: Conclude with a balanced view.

Why the question:

In the run-up to the Union Budget, Bihar’s Nitish Kumar and Andhra Pradesh’s Chandrababu Naidu have demanded special financial packages for their states, potentially increasing the fiscal burden on the Centre and other states.

Key Demand of the question:

To write about the role of the Finance Commission, its allocation criteria and demands by states.

Structure of the answer:

Introduction:

Begin by giving the context of the issue

In the first part, write about the role of the Finance Commission – financial needs and capacities of the central and state governments, promoting economic development, and ensuring that resources are distributed equitably for the benefit of the entire nation.

In the next part, mention the criteria followed by 15th FC.

Next argue whether demands by states are justified or not

Conclusion:

Conclude with a balanced view.