Centre accepts recommendations of Finance Commission

NEW DELHI, February 24, 2015 ( Agency)The Modi Government has accepted the 14th Finance Commission’s (FFC) recommendation that the Centre should transfer 42 per cent of divisible pool to the states, including taxes, grants and so on. The recommendation is for the five-year period 2015-16 to 2019-20.The 13th Finance Commission had suggested these transfers to be at 39.5 per cent.“The Government has accepted the FFC recommendation of 42 per cent in the spirit of cooperative federalism,” a highly-placed source in the Modi Government told The Hindu.In a radical recommendation the FFC headed by former Reserve Bank Governor Y.V. Reddy, has suggested that there be no distinction in the plan and non-plan allocations.A compositional shift in the



Central allocations to States between tax devolutions and plan grants has been recommended too. Tax devolutions are to be higher. The recommendation is on the basis of demands from an overwhelming number of states that the number of centrally sponsored schemes be reduced and the states be given the freedom to spend as they decide rather than on the basis of policies formulated at the Centre.Union Finance Minister Arun Jaitley tabled the FFC report in Lok Sabha earlier on Tuesday. The report will be tabled in Rajya Sabha later in the afternoon.The report has a dissent note on the vertical devolution from FFC Member Abhijit Sen who has said that the 42-per cent transfers have the consequence of reducing the fiscal space available to the Centre.