New Delhi: The Cabinet Committee on Economic Affairs on Wednesday cleared the setting up of the 15th finance commission.
The Narendra Modi government had begun the process of constituting the 15th Finance Commission by allocating Rs10 crore in the 2017-18 budget.
Media reports suggest that former revenue and expenditure secretary, NK Singh is likely to head the commission, however, official confirmation is awaited.
The Finance Commission is set up every five years to suggest principles governing the allocation of tax proceeds among the Centre, states and local bodies.
The recommendations of the previous 14th Finance Commission (FFC), chaired by former Reserve Bank of India (RBI) governor Y.V. Reddy, are valid from 2015 to 2020. The recommendations of the 15th
Finance Commission will be implemented starting 1 April 2020.
Normally, a finance commission is set up two years before the end of the period for which it sets rules for distribution of taxes.
The government spent a total of Rs30.58 crore for the FFC between 2012-13 and 2014-15.
The tight fiscal situation after accepting the recommendations of FFC forced the government to revise its fiscal consolidation road map and set a less ambitious fiscal deficit target of 3.9% of the gross domestic product (GDP) for 2015-16 against the earlier target of 3.6% set in last financial year’s budget.
Finance minister Arun Jaitley in his budget speech said he had deferred the 3% fiscal deficit target to fiscal 2017-18 from 2016-17, now further deferred to 2018-19.
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