Lok Sabha Question No. 160 (STARRED), answered on 2018-07-27
Subject: Federal Fiscal Relations
Ministry: FINANCE
Asked by: N.K. PREMACHANDRAN

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA

## STARRED QUESTION NO. 160

## TO BE ANSWERED ON FRIDAY 27 th  JULY, 2018 [5 Shravana, 1940 (SAKA)]

'Federal Fiscal Relations'

## No. *160, SHRI N. K. PREMACHANDRAN:

Will the MINISTER OF FINANCE be pleased to state:

- a) whether the Union Government proposes to continue the federal fiscal relation in India;
- b) if  so,  the  action  taken  to  strengthen  the  federal  fiscal  relation  between  the  Union  and  the States;
- c) the  details  of  the  action  taken  by  the  Union  Government  taking  into  consideration  the economy  of  Kerala  and  State  finance  for  finalizing  the  terms  of  reference  of  the  Finance Commission;
- d) whether  the  Union  Government  proposes  for  sharing  divisible  pool  among  the  States considering the speciality of each State and the demands of the States and if so, the details thereof; and
- e) whether the Union Government proposes to extend Grant-in- aid to the local bodies directly, if so, the details thereof and the reasons therefor along with the views submitted by the State of Kerala in this regard?

## ANSWER

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FINANCE MINISTER

A statement is placed on the Table of the House.

(SHRI PIYUSH GOYAL)

## Statement referred to in reply to part (a) to (e) of Lok Sabha Starred Question No. *160 for answer on July, 27 2018 raised by SHRI N. K. PREMACHANDRAN:

(a) Yes.

(b) Federal  Fiscal  relations  in  India  are  deeply  embedded  in  two  major  institutions  Finance Commission and Goods & Services Tax (GST) Council. As Constitution required, the Union Government has constituted Fifteenth Finance Commission in pursuance of clause (1) of the article 280 of the Constitution, read with the provisions of the Finance Commission (Miscellaneous  Provisions)  Act,  1951  (33  of  1951),  vide  Presidential  Order  S.O.3755(E). dated 27 th November,  2017. The Finance Commission  is required to provide their recommendations by October, 2019.

(c) Government of India sought views / inputs from all the states for finalising the 'Terms of References' for the Fifteenth Finance Commission. The Ministry of Finance examined the inputs  received  from  various  States.  The  Terms  of  References  of  the  Fifteenth  Finance Commission provide for it to review the current status of the finance, deficit, debt levels, cash balances  and  fiscal  discipline  efforts  of  the  Union  and  the  States,  and  recommend  a  fiscal consolidation roadmap for sound fiscal management.

(d) It is the duty of the Finance Commission under Article 280(3) (a) of the Constitution of India to make recommendations to the President as to the distribution between the Union and States of net proceeds of taxes which are to be, or may be, divided between them under this Chapter and allocation between the States of the respective shares of such proceeds. The recommendations made by the Fifteenth Finance Commission together with an explanatory memorandum as to the action taken thereon will be laid before each House of Parliament as per Article 281 of the Constitution of India.

(e) Presently,  Grant-in-aid  to  the  local  bodies  is  transferred  to  the  concerned  States  as recommended  by  the  14 th Finance  Commission.    Recommendations  of  the  14 th Finance Commission on Grant-in-aid to the local bodies have been inter-alia accepted by the Union Government are applicable for the period from 2015-16 to 2019-20.

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