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Indian Polity / Constitutional Offices and Authorities

Role of Finance Commission in India

According to Article 280, President constitutes a Finance Commission for every 5 years. Finance Commission shall comprise of a chairman and four other members. Finance Commission can be terminated by the President of India at any time with or without reason. The first Finance Commission was established in 1951 under the chairmanship of K.C. Neogy.



Qualification

  • The chairman should have the knowledge of the public affairs. However, rest of the 4 members should have specific qualification.

  • One of the members must have all the qualifications that are required to become a judge of a High Court.

  • Second member should have the knowledge of public finance or financial administration.

  • Third member should be an expert in economics.

  • Another member should have the knowledge of audit and accounting.

Functions of Finance Commission

  • It is a Federal body in the financial matters.

  • It makes recommendations or gives suggestions regarding the division of revenues between the Centre and the States.

  • It also examines and suggests the principles which govern Grant-in-aid to the States from the Consolidated Fund of India for special developmental activities especially for SCs and STs.

  • It also gives advice or opinion on all financial matters which are referred to it by the President.

  • It also makes proposals and other principles and measures to augment the financial independence of local self governments like Panchayats and Nagar Palikas according to 73rd and 74th Constitutional Amendments.

  • All the functions of Finance Commission are advisory in nature. That is the Government may or may not consider its recommendations. But usually the Government accepts them.

List of Chairmen of Finance Commission

  • First Finance Commission - K.C. Neogy, 1952-57

  • Second Finance Commission - K. Santhanam, 1957-62

  • Third Finance Commission - A.K. Chanda, 1962-66

  • Forth Finance Commission - P.V. Rajamannar, 1966-69

  • Fifth finance Commission - Mahavir Tyagi, 1969-74

  • Sixth Finance Commission - K. Brahmananda Reddy, 1974-79

  • Seventh Finance Commission - J. M. Shelat, 1979-84

  • Eighth Finance Commission - Y.B. Chavan, 1984-89

  • Ninth Finance Commission - N.K.P. Salve, 1989-95

  • Tenth Finance Commission - K.C. Pant, 1995-2000

  • Eleventh Finance Commission - A.M. Khusro, 2000-05

  • Twelfth- Finance Commission - C. Rangarajan, 2005-10

  • Thirteenth Finance Commission - Vijay Kelkar, 2010-15

  • Fourteenth Finance Commission - Y.V. Reddy, 2015-20

  • Fifteenth Finance Commission - N.K. Singh, 2020-25

  • Fifteenth Finance Commission - Arvind Panagariya, 2026-31