The 16th Finance Commission Extends an Invitation for Suggestions on Terms of Reference for itself from the General Public, Organizations, and Individuals that it may adopt.

Key Highlights:

  • The appointment of the Sixteenth Finance Commission, in accordance with the Constitution of India, has been made by the President, with Dr. Arvind Panagariya serving as its Chairman. 
  • It is tasked with making recommendations for a duration of five years starting from April 1,2026.
  • The Terms of Reference (ToR) are guidelines from the central government that help the commission to craft its report. 
  • The ToR of the 16th FC are based on constitutional provisions which includes:
  • The distribution between the Union and the States of the net proceeds of taxes.
  • The allocation between the States of the respective shares of such proceeds.
  • The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India.
  • The sums to be paid to the States by way of grants-in-aid of their revenues under article 275 of the Constitution for purposes beyond those outlined in the provisos to clause (1) of that article.
  • The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State. 
  • On the basis of the recommendations made by the Finance Commission of the State.
  • The 16th FC is also mandated to review the present arrangements on financing Disaster Management initiatives.

With reference to the funds constituted under the Disaster Management Act, 2005, and make appropriate recommendations thereon.

Composition of 16th Finance Commission:

  • Chairman: Arvind Panagariya
  • Members: 
  • Full-time members:
  • Ajay Narayan Jha (Former expenditure secretary and member of the 15th Finance Commission)
  • Annie George Mathew (Retired Bureaucrats)
  • Manoj Panda (Economist)
  • Part-Time Member: Soumya Kanti Ghosh (State Bank of India’s group chief economic adviser).
  • It was constituted on 31 December 2023 and It would submit its report to the president by 31 October 2025.

About The Finance Commission:

  • Constitutional Mandate: Article 280 of the constitution designates it as a quasi-judicial entity.
  • Appointment: The President of India appoints a Finance Commission every fifth year or when deemed necessary.
  • Composition: It comprises a chairman and four other members, all appointed by the president.
  • Qualifications: The Parliament is empowered by the constitution to establish the qualifications of members and the appointment process.
  • Tenure: Members serve for the duration specified in the presidential order and are eligible for reappointment.
  • Removal: Members may be removed if they are deemed mentally unfit, engage in misconduct, or face conflicts of interest.

Additional Info:

  • The previous (15th) Finance Commission, led by NK Singh, had suggested that states receive 41% of the Center’s divisible tax pool for the five-year period 2021–22 to 2025–26. 
  • This recommendation was made at the same level as the previous (14th) Finance Commission, led by YV Reddy.

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