From UPSC perspective, the following things are important :
Prelims level : Finance Commission
Mains level : Finance Commission, Its evolving role in fiscal federalism
The High-Level Group on Agricultural Exports set up by the Fifteenth Finance Commission has submitted its report to the Commission.
Try this PYQ from CSP 2019
Q.In India, which of the following reviews the independent regulators in sectors like telecommunications, insurance, electricity, etc.?
- Ad Hoc Committees set up by the Parliament
- Parliamentary Department Related Standing Committees
- Finance Commission
- Financial Sector Legislative Reforms Commission
- NITI Aayog
Select the correct answer using the code given below.
(a) 1 and 2
(b) 1, 3 and 4
(c) 3, 4 and 5
(d) 2 and 5
Why focus on Agri-exports?
- India’s agricultural export has the potential to grow from USD 40 billion to USD 70 billion in a few years.
- The estimated investment in agricultural export could be in the tune to USD 8-10 billion across inputs, infrastructure, and processing and demand enablers.
- Additional exports are likely to create an estimated 7-10 million jobs.
- It will lead to higher farm productivity and farmer income.
Highlights of the report
(A) The HLEG has made its recommendations, major among which are:
- Focus on 22 crop value chains – demand-driven approach.
- Solve Value Chain Clusters (VCC) holistically with a focus on value addition.
- Create a State-led export plan with participation from stakeholders.
- Private Sector should play an anchor role.
- The centre should be an enabler.
- The robust institutional mechanism to fund and support implementation.
(B) State-led Agri Exports
The Group has recommended a State-led Export Plan – a business plan for a crop value chain cluster. It will lay out the opportunity, initiatives and investment required to meet the desired value chain export aspiration.
The Group has also said that for its success, the following factors needed to be considered:-
- Plans should be collaboratively prepared with private sector players and Commodity Boards.
- Leveraging of state plan guide and value chain deep dives.
- The private sector should play an anchor role in driving outcomes and execution.
- The centre should enable state-led plans.
- Institutional governance should be promoted across the state and centre.
- Funding through the convergence of existing schemes, Finance Commission allocation and private sector investment.
Back2Basics: Finance Commission (FC)
- The FC is a constitutionally mandated body that decides, among other things, the sharing of taxes between the Centre and the states.
- Article 280 (1) requires the President to constitute, “within two years from the commencement of this Constitution.
- And thereafter constitute FC at the expiration of every fifth year or at such earlier time as the President considers necessary.
- An FC “which shall consist of a Chairman and four other members”.
Divisible Pool of Taxes
- Under Article 280(3) (a) the FC must make recommendations to the President “as the distribution between the Union and the States of the net proceeds of taxes which are to be, or maybe, divided between them under this Chapter and the allocation between the States of the respective shares of such proceeds”.
- Accordingly, the FC determines a formula for tax-sharing between the states, which is a weighted sum of the states’ population, area, forest cover, tax capacity, tax effort and demographic performance, with the weights expressed in percentages.
- This crucial role of the Commission makes it instrumental in the implementation of fiscal federalism.