1.

Introduction 3

2. Chapter I: Background and Context 5

3. 6
Chapter II: finance commission act of 1980

4. Chapter III: Functions of the commission 7

5. Chapter IV: Problem faces by the commission 8

6. Chapter V: Conclusion 9

7. Chapter VI: Bibliography 10

 INTRODUCTION
The Finance Commission is a constitutional body in India that is responsible for the allocation of
financial resources between the central government and the state governments. It was first
established in 1951 under Article 280 of the Indian Constitution.

The main function of the Finance Commission is to recommend the distribution of tax
revenues between the central and state governments. The Commission also recommends
measures to improve the financial position of the state governments, including ways to
increase revenue and reduce expenditure. In addition, the Finance Commission advises the
central government on matters related to fiscal policy, tax reforms, and other economic
issues.
The Commission is composed of a chairman and four other members appointed by the
President of India. The recommendations of the Finance Commission are not binding on the
government, but they are usually accepted and implemented.

Overall, the Finance Commission plays a crucial role in ensuring the financial stability and
economic growth of the country by providing a fair and equitable distribution of financial
resources between the central and state governments.

Research Question

1. What are the criteria used by the Finance Commission to allocate tax revenues between
the central and state governments in India?
2. How has the role of the Finance Commission evolved over time, and what impact has it
had on the fiscal federalism in India?
3. What challenges does the Finance Commission face in ensuring a fair and equitable
distribution of financial resources between the central and state governments, and how
can these challenges be addressed?
4. To what extent do the recommendations of the Finance Commission influence the
fiscal policies of the central and state governments in India?
5. How has the Finance Commission contributed to the economic development of the
country, and what are the areas where it can play a more significant role in the future?

Research Objective

1. To understand the role and functions of the Finance Commission in India's fiscal
federalism and how it contributes to the overall economic development of the
country.
2. To analyze the criteria used by the Finance Commission to allocate tax revenues
between the central and state governments and the implications of these criteria
for different sectors of the economy.
 3. To evaluate the effectiveness of the Finance Commission in promoting greater
accountability and transparency in the management of public finances at the state
and central level.
4. To identify the challenges faced by the Finance Commission in ensuring a fair and
equitable distribution of financial resources between the central and state
governments and the measures that could be taken to address these challenges.
5. To assess the impact of the recommendations of the Finance Commission on the fiscal
policies of the central and state governments and the extent to which they are
implemented.

Research Methodology

• This research is based on Doctrinal research. The researcher has used secondary data for
the study from the internet also data from published research articles.

Scope of Study

1. The legal framework and constitutional provisions related to the Finance Commission in
India.
2. The history and evolution of the Finance Commission in India, including changes in its
functions, mandate, and recommendations over time.
3. The allocation of tax revenues between the central and state governments in India and the
criteria used by the Finance Commission to determine this allocation.
4. The impact of the Finance Commission's recommendations on the fiscal policies of the
central and state governments in India and their implementation.
5. The implications of the Finance Commission's recommendations for different sectors of
the economy, such as agriculture, industry, and services.

Limitation

1. Limited mandate: The Finance Commission has a limited mandate to allocate tax
revenues between the central and state governments, which may not be sufficient
to address all the fiscal challenges faced by the country.
2. Lack of enforcement powers: The recommendations of the Finance Commission
are advisory in nature and not binding on the central and state governments, which
may limit their effectiveness in promoting fiscal discipline.
3. Political interference: The functioning of the Finance Commission may be
influenced by political considerations, which may affect the objectivity and
fairness of its recommendations.
4. Unequal distribution of resources: The criteria used by the Finance Commission to
allocate tax revenues may not always result in a fair and equitable distribution of
financial resources between the central and state governments, which may
perpetuate regional disparities.
5. Limited representation: The Finance Commission comprises a small group of
experts appointed by the government, which may not adequately represent the
diverse needs and interests of different regions and states in the country.