Key Takeaways: Understanding Finance Commission and its Functions Assessment of Union and State Finances Recommendations on Vertical and Horizontal Devolution Allocation of Grants-in-aid to States and Local Bodies Recommendations on Disaster Risk Management

1. Analysis of the 15th Finance Commission’s
First Report
CA Divakar Vijayasarathy

2. Research Credits
Sundar Rajan S
CA Jugal Gala
CA T K Sundara Rajan

3. Legends used in the Presentation
BE Budgeted Estimates
CG/ Union Central Government
FC Finance Commission
FRBM Fiscal Responsibility and Budget
Management
FY Financial Year
GDP/ GSDP Gross Domestic Product / Gross State
Domestic Product
GST Goods and Services Tax
IMF International Monetary Fund
NDMF National Disaster Mitigation Funds
NDRF National Disaster Response Funds
NDRMF National Disaster Risk Management Fund
NE&H North-East and Himalayan States
PMGSY Pradhan Mantri Gram Sadak Yojana
PSU Public sector undertakings
RBI Reserve Bank of India
SDMF State Disaster Mitigation Funds
SDRF State Disaster Response Funds
SDRMF State Disaster Risk Management Fund
SG State Government
TFR Total Fertility Rate

4. Presentation Schema
Finance Commission – An
Overview
15th Finance Commission Fiscal Roadmap
Assessment of the Union
and the State Finances for
2020-21
Vertical and Horizontal
Devolution
Grants-in-aid
Empowering Local Bodies Disaster Risk Management Way Forward

5. Finance Commission – An Overview

6. Evolution
Finance Commission (FC) was established vide Article 280 of the Constitution of India
It was formed to define the financial relations between the Central Government and the
individual State Governments
The main objective of the FC is to redress the *fiscal imbalance* in the Country
The First FC was started in the year 1951 and so far 15 Finance Commissions are being
constituted with a maximum time gap of 5 years between each FC
Similar to Central FC, the Governor of every State has to constitute a State FC vide Article 243-I
of the Constitution of India
* Fiscal imbalance is the mismatch in revenue and expenditure of the Government, which comprises of the
following:-
1. Vertical imbalance – Imbalance in different levels of Government (e.g. between Centre and State)
2. Horizontal imbalance – Imbalance in same levels of Government (e.g. among States)

7. Composition of Members and Qualifications
FC is appointed by the Hon’ble President of India
As per Article 280 of the Constitution of India, FC shall consist of 5 members out of which 1 shall be the Chairman
Qualification for appointment of Chairman and other members are as follows:-
Chairman of the FC should have experience in public affairs
The other 4 members shall have any of the following qualifications:
• Appointed or qualified to be appointed as Judges of a High Court
• Have special knowledge of the finances and accounts of Government
• Wide experience in financial matters and administration
• Have special knowledge of economics

8. Functions
Allocation and distribution of net proceeds of taxes between CG and SG and the allocation between
the States of the respective shares of such proceeds
Principles governing *grants-in-aid* to the SG
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 State FC’s recommendations
Any other matter referred to the FC by the Hon’ble President in the interests of sound finance
Article 280 of the Constitution of India prescribes the duties of FC
The duties of the FC is to make recommendations to the Hon’ble President on the following
* Grants-in-aid are funds transferred by CG to SG for specific projects or purposes

9. List of Finance Commissions
Finance
Commission
Year of
establishment
Operational
duration
1st 1951 1952-57
2nd 1956 1957-62
3rd 1960 1962-66
4th 1964 1966-69
5th 1968 1969-74
6th 1972 1974-79
7th 1977 1979-84
Finance
Commission
Year of
establishment
Operational
duration
8th 1983 1984-89
9th 1987 1989-95
10th 1992 1995-2000
11th 1998 2000-2005
12th 2002 2005-2010
13th 2007 2010-2015
14th 2013 2015-2020
The current FC is the 15th FC which was established in the year 2017 for the duration period of 2020-2025
(FY). However the same has now been extended till FY 2025-26

10. 15th Finance Commission

11. Overview
15th FC was constituted on 27th November 2017 and was supposed to make
recommendations for a period of five years commencing 1st April 2020
Shri. N. K. Singh (Retired IAS Officer and former Secretary to the Government of India) was
appointed as the Chairman of the 15th FC
FC had to submit two reports – One annual report for the FY 2020-2021 and a final report
for the FY 2021-2022 to 2025-2026 (amendment made vide notification dated 29th
November 2019)
The first annual report had to be submitted on or before 30th November 2019* and the
final report to be submitted by 30th October 2020
*First report of 15th FC was finalised on 27th November, 2019 and submitted to the Hon’ble
President of India on 5th December, 2019

12. Components of Finance Commission
Duties as laid down in Article 280 of the Constitution of India (distribution of tax proceeds between
Centre and the States, distribution of grants-in-aid, measures to augment Consolidated Fund of States)
Recommend a fiscal consolidation roadmap for sound fiscal management
Proposing performance-based incentives for States in specified areas like widening and deepening
of GST tax base, progress made in increasing tax/non-tax revenues and in promoting ease of doing
business, achievements in implementation of flagship schemes of the Government of India, etc.
Allocation of funds for Disaster Risk Management
The annual report, inter alia, recommended the following matters:

13. Reasons for a Single Year Report
Due to the reasons listed below, the FC submitted its report only for the FY 2020-21
Creation of two new Union Territories, Jammu & Kashmir and Ladakh which necessitated the FC
to examine how best the needs can be addressed
IMF’s observation on India’s synchronised slowdown which will result in slower growth in the
economy
Government’s measures in addressing the slowdown in the country through various structural
reforms, the results of which the Government expects over the next few quarters
Forecast uncertainty is high around major structural changes in any economy
Making credible projections for five years using the current year (2019-2020) as the base runs the risk
of turning out to be excessively aspirational and inaccurate
In view of the above, FC has submitted its report for the FY 2020-21 only and is due to submit its final
report by 30th October 2020

14. Fiscal Roadmap

15. Tax revenue has remained broadly unchanged in India since the early 1990s. Hence, FC recommends,
• To increase tax ratio from both macroeconomic and redistributive perspectives
• Broadening of the tax base and streamlining the tax rates
• To increase the capacity and expertise of the tax administration at all tiers of government
FC recommends that the Government should comply with the letter and spirit of the Fiscal
Responsibility and Budget Management (FRBM) Act since it believes that a credible fiscal and debt
trajectory roadmap remains problematic due to uncertainty in the economy
FC also recommends that CG and SG should comply with the recommended path of debt consolidation.
In doing so, they must abide by the definition of both debt and fiscal deficit as contained in the FRBM Act
Fiscal Roadmap – FC’s Recommendation

16. Assessment of the Union and
the State Finances for 2020-21

17. Finances of Union Government

18. GDP Growth
• Union Budget of 2019-20 implied GDP growth of 11 % in 2019-20 (Rs. 211 lakh crores)
over GDP of Rs. 190.1 lakh crores in 2018-19
• Considering the economic activity in the first quarter of 2019-2020, GDP growth in
2019-20 is re-assessed at 10 % (Rs. 209.1 lakh crores)
• With expected pick-up in economic activity and a mild increase in the inflation rate, the
nominal GDP is projected to grow at 11 % in 2020-21 (Rs. 232.1 lakh crores)
Gross Domestic
Product
Based on the results of the 64th Round on “Survey of Professional Forecasters on Macroeconomic Indicators”
conducted by RBI, real GDP growth is estimated at -1.5% for 2020-21

19. Gross Tax Revenue
• Budget estimates of gross tax revenue for 2019-2020 is Rs. 24.61 lakh crores
• Unanticipated slowdown in economic activity and the tax policy changes made by the
Union Government resulted in downward re-assessment of gross tax revenue to Rs.
22.55 lakh crores
• This results in lower *tax buoyancy* of 0.84 for 2019-2020
• However, FC expects that tax buoyancy will improve to 1.14 in 2020-21 in view of
stability in tax policy
• With an expected tax buoyancy of 1.14 and GDP growth of 11%, gross tax revenue is
expected to grow by 12.5% in 2020-21
• Hence, the gross tax revenue is projected at Rs. 25.38 lakh crore for 2020-21
Gross Tax
Revenue
 Tax buoyancy is an indicator to measure efficiency in revenue mobilization in response to growth in GDP
 It is calculated by dividing the percentage change in tax revenue by the percentage change in GDP over the
period

20. Non Tax Revenue and Non-debt Capital Receipts
• Non-tax revenue for 2019-20 is budgeted at Rs. 3.13 lakh crores
• The same is re-assessed at Rs. 3.55 lakh crores after accounting for gains and
shortfalls including RBI’s transfer of Rs. 1.76 lakh Crores
• FC conservatively projected non tax revenue to grow at the rate of GDP growth which
will result in Rs. 3.94 lakh crores in 2020-21
Non Tax
Revenue
• It has two components: a. recovery of loans and advances; and b. proceeds from
public sector disinvestment
• Budget estimate for recovery of loans and advances is Rs. 14,828 crores in 2019-20
and is kept it at the same level for 2020-21
• Disinvestment proceeds are budgeted at Rs. 1.05 lakh crores in 2019-20 and are
projected to remain at the same level in 2020-21
Non-debt
Capital
Receipts

21. Revenue Expenditure
• Considering the progressive easing of policy interest rates by the RBI, FC has assumed
that the interest rate on fresh borrowings will be 6%
• Applying standard calculations for arriving at the average interest cost and projecting
the fiscal deficit at 3.5% of GDP in 2020-21, interest payment liabilities for 2020-21
work out to Rs. 7.10 lakh crores
Interest
Payments
• FC estimates that the pay and allowances of CG will grow at 8 % in 2020-21
• It is also estimated that the annual growth in pensions will be 9% in 2020-21, taking
into account the enhanced contribution of the Government share for the New Pension
Scheme (NPS)
Pensions and
Salaries
• It consists of salaries of defence services and civilians in the defence segment, other
establishment expenditure and expenditure on maintenance of defence assets
• Salary component of defence expenditure is assessed to grow at 8% in 2020-21,
consistent with the growth in salaries of other employees of CG
• FC’s view is that the non-salary component should be allowed to grow at a robust
pace so as to allow for a reasonable level of maintenance of defence assets
• Hence, non-salary component of defence revenue expenditure is projected to grow at
around 15.5% in 2020-21
Defence
Revenue
Expenditure

22. Contd.
• Food, fertilizer and petroleum subsidies are the major subsidies presented in the Union Budget
• FC’s view is that the accumulated off-budget liabilities relating to insufficient provision for
subsidies should be clearly identified and not increase further
• BE for 2019-20 and 2020-21 for food subsidies is kept at the same level at Rs. 1.84 lakh crores
• Considering the trends in disbursements of petroleum subsidy and fertilizer subsidy till
September 2019, 4% increase is considered for 2020-21
Major
Subsidies
• It includes the non-salary, non-subsidy expenditure in different sectors by CG and its institutions
• For 2020-21, FC assessed a growth provision equalling the projected GDP growth providing for
important sectors like science and technology, atomic energy, external affairs, space, etc.
• Hence, the BE for 2020-21 is at Rs. 31.9 crores compared to Rs. 29 crores in 2019-2020
Other Revenue
Expenditure
• It consist mainly of schematic transfers (central sector schemes and centrally sponsored
schemes), GST compensation, revenue deficit grants, grants for disaster relief funds, grants to
the local self-governments and other grants recommended by FC
• BE for 2019-20 totalled to Rs. 5.96 lakh crores and for 2020-21, it is projected at Rs. 7.22 lakh
crores
Transfers to
the States,
Union
Territories and
Local
Governments

23. Capital Expenditure and Fiscal Deficit
• Financing expenditures, which should legitimately be covered within the budget, through off-budget
borrowings and through para-statal entities (government enterprises) detracts from compliance with
the letter and spirit of the FRBM Act (FC will address this issue in its final report)
• FC is of the view that there is an imperative need to ensure that there is no further addition to the
extra-budgetary funding of budgetary expenditure and that the accumulated stock of such liabilities
gets eliminated in a time-bound manner
• Keeping in view the need to sustain capital expenditure at reasonable levels, and taking a
disaggregated view of the different components of expenditure and also assuming no further increase
in off-budget financing, fiscal deficit in 2020-21 is estimated around 3.5% of GDP
 *Off-budget borrowings or extra budgetary resources are those financial liabilities that are raised by Public
Sector Undertakings for which repayment of entire principal and interest is done from Government budget
 Such borrowings are not part of the official budget calculations
Fitch Solutions (an international credit rating agency), during the month of April 2020, estimated the fiscal deficit
of India for the year 2020-21 at 6.2% of the GDP amidst COVID measures taken by the Government

24. Security Related Expenditure
FC’s Terms of Reference questioned whether a separate mechanism for funding defence and internal
security can be set up, and if so, how such a mechanism should be operationalised
Ministry of Defence has proposed setting up a non-lapsable fund, levy of cess, monetisation of surplus land
and other assets, tax-free defence bonds and utilising the proceeds of disinvestment of defence PSUs
FC intends to constitute an expert group comprising representatives of the Ministries of Defence, Home
Affairs and Finance to consider the detailed modalities and implementation plan for accretion to, and
utilisation of, the proposed non-lapsable fund or an alternative mechanism

25. Defence Expenditure to GDP
2.4 2.5 2.5 2.4 2.5
1.9 1.9 1.9 1.9 1.9
3.9
4.2
5.5
4.9
4.1
1.8 1.8 1.8
3.2 3.1 3.2 3.3
3.5
0
1
2
3
4
5
6
2018 2017 2016 2015 2014
%ofGDP
Year
Defence Expenditure as a % of GDP
India China Russia United Kingdom United States

26. Projection of Union Government Finances for
2020-21
Rs. in Crores

27. Contd. Rs. in Crores

28. Finances of the State
Governments

29. Gross State Domestic Product
Gross state domestic product (GSDP) forms the basis for analysing fiscal parameters of the States
The base year for the projection of GSDP is 2017-18
North East and Himalayan States* have been differentiated from the general States and they have been
projected to grow at a slightly lower growth rate than the general States
Aggregate GSDP growth has been anchored around the country's GDP growth during the 2018-19 to 2020-
21 period in a manner as to reduce the vast variability in GSDP growth observed in the recent years
*North East and Himalayan states are Arunachal Pradesh, Assam, Himachal Pradesh, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand

30. Projected Rate of Growth in GSDP/GDP (in %)

31. Own Tax and Non-tax Revenue of States
Until June 2022, States' GST revenues are protected by a scheme of guaranteed compensation by CG with
14% growth of tax revenue
The protection of GST revenues at the rate of 14%, set against the growth in aggregate GSDP of 11% in 2020-21,
yields a buoyancy of 1.27
Considering that the recent slowdown in economic activity is affecting collections from non-GST taxes, the tax
buoyancy of States (including of GST and non- GST taxes) is assessed at a uniform 1.16 with respect to GSDP
during 2018-19 to 2020-21
Own non-tax revenues of the States include interest receipts, dividends and profits, royalties, irrigation
receipts, receipts from forestry and wildlife, receipts from elections, etc.
These revenues grew at a trend rate of 9.9% during 2011-12 to 2017-18
For 2020-21, FC has taken a macro view on non-tax revenue and projected that, with focus on rationalising
fees and user charges, these revenues should keep pace with the growth in GSDP of each State
Non-tax revenue
Tax revenue
Revenue Expenditure
Aggregate revenue expenditure of all the States taken together shows growth of 9.4% in 2020-21

32. Projected Own Revenue Receipts and Revenue
Expenditure for 2020-21 Rs. in Crores

33. Contd.
ORR – Own Revenue Receipts; OTR – Own Tax Revenue; ONTR - Own Non-Tax Revenue
TRE – Total Revenue Expenditure; IP – Interest Payment; PDR – Pre-Devolution Revenue
Note:
# - Summation takes into account only deficits and not surpluses

34. Vertical and
Horizontal Devolution

35. Vertical Devolution
 Distribution of net proceeds of taxes between the Union and the States is called vertical
devolution
 Net proceeds of taxes means all the taxes reduced by cost of collection and cess & surcharges
 Until the Tenth FC, separate percentages had been recommended for devolution of income
tax and Union excise duties
 However, after the Eightieth amendment to the Constitution, net proceeds of taxes collected
by the Union are shareable with the States
States' Share in Divisible Pool (in per cent)

36. Contd.
 FC recommends an aggregate share of 41% of the divisible pool (amount used for
distribution between Union and States) to be devolved to States in the year 2020-21
 The 1% decrease is to provide for the newly formed union territories of Jammu and
Kashmir, and Ladakh from the resources of CG
Divisible pool for the year 2020-21 is calculated as follows:
Gross tax revenue
(-) cost of collection of taxes
(-) cesses and surcharges including the GST compensation cess
(-) tax revenue of the Union Territories
(-) transfer from the National Calamity Contingency Duty (NCCD) to the National
Disaster Response Fund (NDRF)
= Divisible Pool
Divisible pool is estimated around 82.2% of the gross tax revenue at Rs. 20.86 lakh crores in 2020-21
• Unlike the previous FC reports, this report excludes transfer to NCCD and NDRF from the
calculation of divisible pool
• This reduces the amount of share under devolution

37. Horizontal Devolution
 Distribution of the tax proceeds allocated to the States (as a % of divisible pool) amongst the
States is called as horizontal devolution
 In the past, this has been mainly driven by considerations of fiscal need, equity and performance
Criteria and Weights in Previous Finance Commissions

38. Contd.
FC recommends three principles of need, equity and efficiency (performance) for
determining the horizontal devolution formula for the year 2020-21
Need Based Criteria
Population
• Population of a State represents the needs of the State to incur expenditure for providing services to its
residents
• FC uses the population data of 2011 as stipulated in its Terms of Reference
• Population criterion has been assigned a weight of 15%
Area
• Larger the area, greater is the expenditure requirement for providing comparable services
• It is also true that certain minimum costs are incurred by the States even if the area is very small
• Hence, a moderate weight of 15% is assigned
Forest and
Ecology
• This is for the ecological services being provided by a State’s forest cover to the country as a whole
• This is arrived at by calculating the share of the dense forest of each State in the aggregate dense forest of
all the States
• A weight of 10% is assigned for the forest and ecology criterion

39. Contd.
Equity-based Criterion
• This criterion is to make the devolution formula more equalising and progressive
• It provides higher devolution to States with lower per capita income and vice-versa
• FC has assigned the income distance criterion with a weight of 45%
Income
Distance
Performance-based Criteria
• FC recommends a criterion of demographic performance by using a measure of the total
fertility rate* (TFR) data of all States
• States which have achieved lower TFR will be scored higher on demographic
performance whereas States with higher TFR will be scored lower
• This criterion is assigned a total weight of 12.5%
Demographic
Performance
• This criterion will reward the States with higher tax collection efficiency and, at the same
time, will also encourage all States to be more tax efficient
• A total weight of 2.5% has been assigned to this criterion
Tax Effort
*Total Fertility Rate is the average number of children that would be born to a woman over her lifetime if she
was to experience the exact current age-specific fertility rates and survives her child bearing years fully

40. Inter se Shares of States for 2020-21

41. Grants-in-aid

42. FC has recommended, inter
alia, the following grants
Revenue deficit
grants
Grants to local
bodies
Disaster
management
grants
Sector-specific
grants
Performance
grants
State-specific
grants
• Based upon the projected tax revenue of CG and the shares derived from the horizontal
devolution formula, the share of each State is derived in absolute numbers
• This has been used to derive the post-devolution revenue deficit/surplus for States
• 14 out of 28 States face a combined post tax devolution revenue deficit of Rs. 74,340 crores
• Accordingly, these 14 States are recommended revenue deficit grants
Revenue
Deficit Grants
Revenue Deficit Grants

43. State-wise Revenue Deficit Grant for 2020-21

44. Contd.
*North East and Himalayan states are Arunachal Pradesh, Assam, Himachal Pradesh, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand

45. Special Grants
Special
Grants
• This is given to ensure that no State gets less than the total amount of devolution and revenue
deficit grants estimated to be received in 2019-20
• FC noted that Karnataka, Mizoram and Telangana are to be funded with special grants since
their devolution plus revenue deficit grants for 2020-21 is less than that of 2019-2020
• Hence, FC has provided grants to these States aggregating to Rs. 6,764 crores in 2020-21
Recommendation for Special Grants

46. Grants for Nutrition Health Grants for Police
Training and Housing
Railways Maintenance Grants
for PMGSY roads
Pre-primary education Grants for Judiciary Grants for Statistics
Sectoral Grants
 FC recommended grants of Rs 7,735 crores to the States for nutrition in 2020-21 in addition to the
grants allocated by CG under centrally sponsored schemes* (CSS)
 With respect to other sectoral grants mentioned above, FC will allocate funds in its final report
*Centrally Sponsored Schemes are schemes that are implemented by SG but are largely funded by CG
with a defined SG share. E.g. Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)
Sectoral Grants

47. Performance Based Incentives
FC has chosen 6 different areas for these incentives
Implementation of
Agriculture Reforms
Development of
Aspirational Districts
and Aspirational Blocks
Power Sector
Reforms
Enhancing Trade
including Exports
Incentives for Education Promotion of Domestic and
International Tourism
Performance Based Incentives
 States should take preparatory action by establishing a credible implementation and monitoring system in 2020-21
 The grant amounts will be provided in the final report

48. Empowering Local Bodies

49. The total size of the grant for local bodies* in 28 States is Rs. 90,000 crores
This is equivalent to 4.31% of the divisible pool
The inter se distribution of grants for local bodies among the States may be based on population and area in the
ratio of 90:10
The proportion of grants between rural and urban local bodies is recommended in the ratio of 67.5:32.5 i.e. Rs.
60,750 crores (rural) and Rs. 29,250 crores (urban)
All the tiers in the panchayats (village, block and district) shall receive the grants
Inter se distribution among the panchayats shall be in conformity with the following bands - 70-85% for village
panchayats, 10-25% for block panchayats and 5-15% for district panchayats
States shall transfer grants-in-aid to the local bodies within 10 working days of receipt from CG failure of which
attracts interest at the rate prevailing on market borrowings/State Development Loans (SDLs) for the previous year
Grants-in-aid to Local Bodies
• Local bodies are institutions of the local self governance, which look after the administration of an area or small
community such as villages, towns, or cities
• They are broadly categorised into two: 1. Rural local bodies (Panchayats) and 2. Urban local bodies (Municipalities)

50. Contd. Aggregate Grants to Local Bodies for 2020-21

51. Disaster Risk Management

52. SG incur most of the disaster-related expenditure through their State Disaster Response Funds
(SDRF) and these funds could be augmented and replenished through the National Disaster
Response Fund (NDRF) when disasters of rare severity necessitate it
Disaster Management Act, 2005 stipulates the constitution of mitigation funds in addition to
disaster response funds at the States and Union level
FC recommendations for the period 2020-21
Mitigation funds shall be set up at both national and state levels in the form of National Disaster
Mitigation Funds (NDMF) and State Disaster Mitigation Funds (SDMF)
These funds shall be used for those local level and community-based interventions which reduce the
risks and promote environment-friendly settlements and livelihood practices
Creation of disaster mitigation funds is over and above the disaster response funds and they are
together called as National Disaster Risk Management Fund (NDRMF) and State Disaster Risk
Management Funds (SDRMF)
Creation of Mitigation Funds

53. Allocation to NDRMF and SDRMF
Ratio of cost sharing arrangement between the CG and SG to fund the SDRMF is,
• 75:25 for general States
• 90:10 for NE&H states
Total amount allocated to the States for SDRMF is Rs. 28,983 crores and for NDRMF is Rs. 12,390 crores
in 2020-21
Funds in SDRMF and NDRMF shall be shared in the manner as provided in the table below
National and States Level Allocation for Disaster Risk Management for 2020-21

54. State-wise Allocation of SDRMF for 2020-21
Rs. in Crores
On account of COVID-19, CG had released Rs. 11,092 Crores under SDRMF to all States on 3rd April 2020

55. Contd.
Earmarked Allocations
 FC recommends that some amount shall be earmarked within NDRF and NDMF for certain priorities
related to preparedness, mitigation and recovery that need to be supported through special initiatives
 Accordingly, it earmarks Rs. 1,200 crores within the NDRF and Rs. 1,190 crores within NDMF in 2020-21
 Priorities for which funds are earmarked are listed below
Priorities
Funds earmarked under NDRF
(Rs. 1200 crores)
Funds earmarked under NDMF
(Rs. 1190 crores)
expanding and
modernisation
of fire services
(Rs. 1000 crores)
resettlement of displaced
people affected by coastal
and river erosion
(Rs. 200 crores)
catalytic assistance to 12 most
drought-prone States* for
preparing district-level drought
mitigation plans (Rs. 240 crores)
managing seismic and
landslide risks in 10 hill
States* (Rs. 150 crores)
reducing the risk of urban
flooding in 7 most populous
cities* (Rs. 500 crores)
mitigation measures to
prevent erosion
(Rs. 300 crores)
* Refer next slide

56. Contd.
• Andhra Pradesh, Bihar, Gujarat, Jharkhand, Karnataka, Madhya Pradesh,
Maharashtra, Odisha, Rajasthan, Tamil Nadu, Telangana, and Uttar Pradesh
12 most drought-
prone States
• Arunachal Pradesh, Assam, Himachal Pradesh, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura and Uttarakhand (North East and Himalayan states)
10 hill States
• Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad, Ahmedabad and Pune
7 most populous
cities

57. Way forward

58. • FC has recommended major items in its report as specified in its Terms of Reference with respect to,
inter alia, devolution of tax proceeds, fiscal roadmap, revenue deficit grants, grants for local bodies and
disaster risk management
• Some of the other items pertaining to State-specific grants, sector specific grants, separate mechanism
for funding defence and internal security, etc. will be addressed in detail in the final report
• FC suggests that policy issues need to be addressed by the Government in areas like increasing tax
buoyancy, improving the structure and system of GST, increasing the capacity and expertise of the tax
administration at all tiers of government, etc.
• Outstanding extra-budgetary liabilities need to be clearly identified and eliminated in a time-bound
manner with transparent reporting of deficit and debt as provided in FRBM Act
• FC recommends the constitution of an expert group to draft a legislation which will establish a
statutory framework to implement the essential features of a sound Public Financial Management
System that is consistent with international best practices
• Strengthening of the Union-State federal partnership will be an important driving force for enabling
the country to realise its growth potential
• However, FC’s final report might project much lower values of revenue and a significantly higher
amount of expenditure and fiscal deficit for the initial years due to the impact of COVID-19
Way forward

59. Thank You!
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