The Finance Commission of India deals with the sharing of revenue between the States and the Centre and it has a major role to play in maintaining fiscal federalism through its recommendations. The latest report by the Fifteenth Finance Commission consisting of recommendations for the 2021-26 period has dealt with several issues keeping in mind the needs of the States and Centre. The Finance Commission has been described as the balancing wheel in the Constitution because it is designed to correct the structural and inherent imbalances between the resources and the expenditure of the Union and the States. The Commission faced the unprecedented challenge of making projections and recommendations under the most uncertain circumstances yet it consistently tried to balance the views of all the stakeholders to achieve efficient, equitable, inclusive solutions in this extremely diverse country.
The recent report of the Union comptroller and auditor general (CAG) on the goods and services tax (GST) does praise its rollout as a landmark achievement. Notably, the revenue obtained from the GST in July 2019 stood at Rs.1.02 lakh crore. This is a 5.8% hike when compared to the GST revenue collected during the same month last year. However, the CAG also points out several deficiencies in its implementation.
The NITI Aayog, in 2017, had called for Competitive Cooperative Federalism to define the relationship between the Centre and the States. This concept puts the burden of transforming India into the hands of the State governments. In recent times, this concept has gained prominence following the participation of the Chief Secretaries of all States and Union Territories in the presentation of the best practices in each of their jurisdictions. However, NITI Aayog must take the necessary steps to analyse the ground reality so as to provide equal grounds to all the states – including those that are economically and socially marginalized.