14th Finance Commission | Learn Economics on Ecoholics #Finance

so here the topic of this CashNews.co is 14 Finance commission so first of all we will write the tenure of the 14th

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance commission that is first april 2015 to 31st march 2020. so this is the tenure of the 14th none;">Finance commission but before going into the 14th Finance commission we need to understand the relevance and the importance of the body called

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance commission so according to article article 280 of the indian constitution there’s a need for the president to constitute a

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance commission in order to in order to devolve the net proceeds of the union government to the states and among the states it means there are two concept the vertical devolution and the horizontal revolution

we’ll discuss in detail these two devotion in few minutes so according to article 280 presidential constitute a Finance commission for the period of five years so the

period is five years president can constitute a Finance commission uh before the period of five years it means the ten year should be five years or less than five years so

now we’ll understand about the process of this Finance commission or that is 14 text-decoration: none;">Finance commission so according to this we are aware about that is this a constitutional body because Finance commission mentioned in our

indian constitution so for the very first time on 2nd of january 2013 the Finance commission constituted by the president of india and on 15th december 2014 the 14th

Finance commission submitted its recommendation to the union government in the few days of time union government accepted that recommendations all these recommendations the

major highlight of this Finance commission will discuss entity first of all this text-decoration: none;">Finance commission allotted 42 percent of the total tax Revenue that is net proceed should be distributed between the states so according to the 14 text-decoration: none;">Finance commission 42 percent of the union government’s resources should be distributed to the state government now understanding the worst one of the most important factor in this period that 42 percent is a big jump from the previous

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance commission suppose this is 14th Finance commission

the 13th Finance commission actual distribution was 32 it means the 10 percent jump from the last color: #1a73e8; text-decoration: none;">Finance commission so the 10 percent was a huge jump but the central government accepted all the recommendation because there’s one compositional shift from the grant to the tax revolution according to the

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance commission that is foreign Finance commission the

primary route should be the transfer of tax Revenue not the grant that is why they increased the proportion of the devolution from the union to the state government so this is a vital factor of this #1a73e8; text-decoration: none;">Finance commission because lot of states were complaining that they were they were a shortage of resources because of lack of tax Revenue they were incurring from the Taxes included in the state list that is why the

more and more tax devolution should be come from union government that is why the primary route should be tax devolution now understanding the composition of this Finance

commission why we ready why we ready is the chairman of the Finance commission so he is the chairman first number second sushma not one of the other members third one is m

govind rao fourth one and the fifth one a widget same so the last name is past time member so the last abhijit sin is the first time member of the 14th Finance commission so

this is the composition of this 14th Finance commission with the chairman y v redmi now we’ll understand the two important concept that is vertical divolution and the

horizontal division now first of all we need to understand the vertical division it means whatever the union resources allocated to the states this comes under the category of vertical devolution it means vertically means from top to down if you have union government union government at the top

then comes state and then local self-governing bodies the local self-governing bodies is the last year of this government so vertically devolution of the resources means from union government to the state government and finally to the local self government bodies that is grandpa chance and

municipalities so this is known as vertical devolution now understanding the horizontal dilution there are so many states in our country that is 29 so the number 29 it means whatever the resources we are allocating among the states is known as horizontal distribution or horizontal devolution it

means the resources are located to the horizontally among the states because states are at the par it means the second tier of the government is filled with the state government so we need to understand that the horizontal devolution is among the states and the vertical revolution from union to the

states so these two concepts are very important according to the this Finance commission now there’s a new phenomena a new formula developed by this

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance commission so we need to discuss that formula also so first one will understand criteria then we consider weight so first criteria is Income distance 14

Finance commission gave the weightage of 50 percent to Income distance now the second is population 1971 census we’ll discuss in just few minutes 17.5

percent now the third criteria is area that is 15 percent area has a floor limit of two percent we will discuss in few minutes what is the floor limit here the fourth one is demographic change this financial mission gave 10 weightage to demographic change and the last that is for the first time any

Finance commission introduced this thing that is forest cover foreign there is 7.5 percent wage given by this

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance commission now we’ll understand one by one all these criteria so first is Income distance this uh this #1a73e8; text-decoration: none;">Finance commission taken some criterias of Income distance it means you have to calculate from the gsdp now there’s one concept known as gsdp gross state domestic product so it means gross domestic state product we are calculating

per capita Income per capita Income of every state in our country so the first highest per capita Income state is goa second is sikkim and third is haryana so according to this 14 bold; color: #1a73e8; text-decoration: none;">Finance commission they have taken they have taken haryana not goa and sikkim there are two reason because goa and sikkim is highly skewed it means their per capita Income does not highlight the average per capita

Income of our country that is why go is much higher in terms of per capita Income when we compare to the list of other states second sikkim is also on the higher sides that is why the 14th color: #1a73e8; text-decoration: none;">Finance commission took haryana as the top lincoln level and then from in comparison to the haryana we are calculating all these the Income distance from the considering haryana as the top state so this was the major factor in

calculating Income distance so we have taken from 2010 and 11 2000 from 2010 and 11 to 2012 and 13 these three years per capita Income of gsdp for the calculation of Income distance it means whatever the amount we are distributing horizontally

among the state these are the criterias so 50 according to the Income distance now the second point is population we are uh we all are aware that india has a population around 125 crores and population of 1971 census deliberately taken because 1971 census was one of the major

stable year and the year of population explosion also so 17.5 according to this census there’s one reason why we are not taking 2011 sensors because from census like 1971 1981 1991 our population has been increasing order or although the growth rate was not very much high but the population

has increased so dramatically so according to this Finance commission population explosion the year of 1971 should be freezed because if the population has increased the

share of uh share of Revenue was decreasing for few states like kerala and tamil nadu because kerala and tamil nadu implemented very well at the family planning program so that is why if we are taking 2011 it means we need to allot more resources to up and behave that these two

states were not able to control their population so that is why 1971 is the fixed year for the population criteria now area there’s two percent ceiling two percent floor limit i rather two percent floor limit it means for a smaller state like sikkim nagaland manipur these are smaller states

for goa as well as with two percent is a floor limit it means you cannot go beyond the two percent that is why you have to give some amount of uh some amount of net proceed to these states also now the fourth one is demographic change it means the demographic change since 1971. so population is

used because uh our southern indian states experiencing uh average age higher than the comparison to the northern states that is why demographic change also one of the major factor of this foreign text-decoration: none;">Finance commission now last one the innovative factor included by this Finance commission that is forest cover 7.5 percent is the

weightage given to the forest cover according to the area wise madhya pradesh has the highest forest cover in our country but the dense and the highest number of figures uh highest number of figure about the forest cover areas was arunachal pradesh so according to the forest cover data these states

are losing due to forest cover it means we need to give some amount of allocation according to maintain the forest cover of these states if we consider forest cover it means there’s opportunity cost to maintaining the forest or replace the forest with industry it means if you are maintaining

forest cover higher than the average amount that is 33 percent of the total area it means the Finance commission should give more Revenue in order to

maintain that forex cover so these are the major factor criteria for the horizontal distribution according to the 14 Finance commission now we’ll understand the third

criteria that is the third three tier government the local self-government bodies panchayat and that municipality bodies how the funds should be allocated to these local bodies so we’ll draw one flowchart that is grant to states so here we write gram panchayat and the second one is

municipalities so the location of the distribution of net proceed divided into two part that is basic grant and performance grant on the same lines for municipality bodies this is also divided into two parts that is basic grant and performance grant so there’s some ratio of the division of

the amount that is for gram pancha it is 90 is to 10 and for municipality it is 80 is to 20. so now in simple words it means basic grant is 90 and performance grant is 10 percent it means if some uh grand puncher is performing well it means that that 10 ratio is very important and vital in order to

get more funds here the same line 80 is 220 so if we consider these things this is one of the good factor of this Finance commission because the performance grant is also a

criteria for the municipality bodies and and charles now we’ll understand the how much amount the Finance commission allocated so grant to state total is 2 like 87 000

crores is the figure to like 87 000 crores approximately this is not the actual figure gram penchant to gram panchayat it is around 2 lakh 2 lakh crores and for municipalities it is 87 000 crores so this is the approximate figures of the

style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance commission give to the two lakh crore to the grand panchayat and 87 000 crores to municipalities hope you like this CashNews.co this is the brief introduction about 14

href="https://cashnews.co/finance" style="font-weight: bold; color: #1a73e8; text-decoration: none;">Finance commission stay tuned tune to this uh channel ecoholics and please subscribe like and share this CashNews.co if you have any doubt any correction or any feedback you can mention

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