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16th Finance Commission sets up five-member Advisory Council: What are its role and functions?

The Finance Commission is a constitutionally mandated body established every five years to coin a formula for distributing the net tax proceeds between the Centre and the states, as well as among the states and local bodies.

Edited By: Anurag Roushan @Candid_Tilaiyan New Delhi Updated on: July 11, 2024 13:40 IST
16th Finance Commission sets up five-member Advisory Council
Image Source : INDIA TV There will be five members in the Advisory Council.

The Sixteenth Finance Commission, led by Arvind Panagariya, set up a five-member Advisory Council aimed at expanding the scope of the Commission's work. This panel will be chaired by Poonam Gupta, who currently serves as the Director General of the National Council of Applied Economic Research (NCAER). The council's formation is a strategic move to leverage expert insights and ensure a comprehensive approach to the Commission's objectives.

Members of Advisory Council

  1. Poonam Gupta -- Chief of the panel 
  2. DK Srivastava
  3. Neelkanth Mishra
  4. Pranjul Bhandari
  5. Rahul Bajoria

Role and Functions of Advisory Council 

The statement regarding the role and functions of the Advisory Council outlined its purpose in broadening the Commission's ambit and understanding. The council will achieve this by seeking the best national and international practices on matters related to fiscal devolution and enhancing the quality, reach, and enforcement of the Commission's recommendations. Additionally, the panel will assist in preparing papers or research studies and monitor or assess studies commissioned by the Finance Commission. These efforts aim to deepen the Commission's comprehension of the issues within its Terms of Reference (ToR), thereby enabling more informed and effective decision-making.

The Terms of Reference (ToR) approved by the Cabinet for the Finance Commission include the distribution of the net proceeds of taxes between the Union and the states under Chapter I, Part XII of the Constitution, as well as the allocation of the respective shares of such proceeds among the states. The ToR encompasses the principles governing grants-in-aid of the revenues of states from the Consolidated Fund of India and the sums to be paid to states as grants-in-aid of their revenues.

The Finance Commission, as stipulated by the ToR, is also tasked with suggesting measures to augment the Consolidated Fund of a State to supplement the resources of panchayats and municipalities. This comprehensive mandate ensures that the Commission addresses critical aspects of fiscal devolution, resource allocation, and local governance funding, thereby contributing to a more balanced and equitable financial framework across the country.

16th Finance Commission 

The Sixteenth Finance Commission was constituted in December 2023 with Arvind Panagariya, former Vice-Chairman, NITI Aayog as its Chairman. The Commission's primary task is to determine revenue sharing between the Central Government and State government for a period of five years. The Sixteenth Finance Commission comprises a chairman and various members who are appointed by the President of India. It also consists of one secretary post.

ALSO READ: Arvind Panagariya appointed as 16th Finance Commission Chairman


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