Finance Commission
| वित्त आयोग | |
 Emblem of India |
|
| Commission overview | |
|---|---|
| Formed | November 22, 1951 |
| Jurisdiction |
 Government of India
|
| Headquarters | New Delhi |
| Commission executives |
|
| Website | fincomindia |
The Finance Commission was established by the President of India in 1951 under Article 280 of the Indian Constitution. It was formed to define the financial relations between the central government of India and the individual state governments. The Finance Commission (Miscellaneous Provisions) Act of 1951 additionally defines the terms of qualification, appointment and disqualification, the term, eligibility and powers of the Finance Commission. As per the Constitution, the Commission is appointed every five years and consists of a chairman and four other members.
Since the institution of the first Finance Commission, stark changes in the macroeconomic situation of the Indian economy have led to major changes in the Finance Commission's recommendations over the years.
There have been fourteen Commissions to date. The most recent was constituted in 2013 and is chaired by Y. V. Reddy, former Governor of the Reserve Bank of India.
As a federal state, India suffers from both vertical and horizontal fiscal imbalances. Vertical imbalances between the central and state governments result from states incurring expenditures disproportionate to their sources of revenue, in the process of fulfilling their responsibilities. However, states are better able to gauge the needs and concerns of their inhabitants and therefore more efficient at addressing them. Horizontal imbalances among state governments result from differing historical backgrounds or resource endowments, and can widen over time.
The Finance Commission was established in 1951 by Dr. B.R. Ambedkar, the then-incumbent Law Minister, to address these imbalances. Several provisions to bridge the fiscal gap between the Centre and the States were already enshrined in the Constitution of India, including Article 268, which facilitates levy of duties by the Centre but equips the States to collect and retain the same. Similarly, Articles 269, 270, 275, 282 and 293, among others, specify ways and means of sharing resources between the Union and States. In addition to the above provisions, the Finance Commission serves as an institutional framework to facilitate Centre-State Transfers.
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