GS2 · 15 marks · 250 words

In what ways are the terms of reference of the 16th Finance Commission different from that of the previous Finance Commissions? Despite increasingly progressive devolution by subsequent Finance Commissions, examine the factors that propel economic disparities across various States.

Answered by 9 toppers · CSE 2022–2025

Centre-State RelationsFederalismConstitutional Bodies

Syllabus: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

How toppers approached it

From 7 of the 9 answers · about 230 words · 71% drew a diagram.

Opening

  • A constitutional or legal provision71%
  • A definition14%
  • No separate opening14%

Body

  • Points57%
  • Points and prose43%

Close

  • A summary57%
  • A way forward29%
  • No separate close14%

The toppers’ answers

Raghav JhunjhunwalaAIR 4 · CSE 2025 · 214 wordsTheir whole copy

Opening · a constitutional or legal provision

Finance Commission (Article 280) has been adjudged as the 'Balancing wheel of fiscal federalism' in India; its TOR being determined by President of India.

Body · points and prose

# TOR for 16th F.C.

16th F.C. has been constituted under chairmanship of Dr. Arvind Panagariya &

Standard TOR

Diagram
- Determining Vertical Devolution - Determining criteria to distribute funds across states (Horizontal Equity) - Determination of Principles to guide Grants in Aid - As per any request of President

Different TOR

  1. Accomodating concerns of southern states who argue discrimination towards more populous states.
  2. Accomodating impacts of climate change upon Exchequer's estimates.
  3. Claims from states against Rev. Def grants that they get punished for financial discipline
  4. Augmenting local body finances.

Increasing vertical devolution by F.C over years

Diagram
- A line graph showing vertical devolution percentages over Finance Commissions. - X-axis: 13th FC, 14th FC, 15th FC - Y-axis: Percentage - Data points: 13th FC = 28%, 14th FC = 42%, 15th FC = 41%

13th F.C. undertook a significant recommendation towards vertical equity

Factors which propel economic disparities

  1. Status of state's economy
Diagram
- An outline map of India. - Southern and western states shaded to indicate High GSDP/More prosperous. - Eastern and northern states marked to indicate under developed.

High GSDP ← More prosperous Under developed →

(2) natural causes : East India faces severe flooding challenges (Immense crop loss, Poverty)

(3) Poverty & unemployment + Historic (Ex: Bengal's zamindari scar was furthered by Freight Equalizi. Policy of 1950s)

(4) Poor Governance major role to estd. a sound financial systm.

F.C.'s role in curbing Disparities

(1) 15th F.C gave 45% weightage to 'Income Distance'

(2) Revenue Deficit grants to states in need.

(3) Funding to local bodies to improve GrassRoots developments

Close · a summary

Thus, 16th F.C. would have a critical challenge in addressing concerns of various stakeholders & ensuring sound fiscal Federalism.

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