Centre sets up Advisory Council to assist Finance Commission

The move is seen as an attempt to douse anger among southern states

Finance Minister Arun Jaitley | Reuters Finance Minister Arun Jaitley | Reuters

The Central government on Wednesday constituted an Advisory Council to advise the 15th Finance Commission on matters related to its Terms of Reference. Possibly, it is intended to douse the anger among southern states over the Terms of Reference. 

Important among the tasks before the Advisory Council is to “help in broadening the Commission's ambit and understanding to seek best national and international practices on matters pertaining to fiscal devolution and improving the quality and reach and enforcement of its recommendations.”

The Finance Commission had so far made the 1971 Census as the basis to decide the transfer of tax money to the states, with those with a higher population getting a higher chunk of the tax money. This time, however, the government has directed the 15th Finance Commission to use the 2011 Census figures for purposes of devolution of taxes to the states.

This has led to a lot of criticism bordering on the opposition by states that have succeeded in bringing down their population growth. They say that because of their success in effecting a reduction in population growth, they are being punished with less funds, while states—largely Uttar Pradesh, Bihar and other northern states—that have not done well on this parameter, will stand to benefit.

The states that are upset with the use of 2011 Census include Kerala, Karnataka, Andhra Pradesh and Tamil Nadu.

The members of the Advisory Council are Arvind Virmani, president of Forum for Strategic initiatives; Surjit Bhattal, chairman of  Oxus Research and Investments and part-time member of the PM's Economic Advisory Council; Sanjeev Gupta, former deputy director in the IMF; Pinaki Chakraborty, Professor at NIPFP; Sajjid Chinoy, Chief India Economist of JP Morgan and Neelkanth Mishra, Managing Director and the Credit Suisse India Economist and Strategist. 

Other functions of the newly set-up committee will be to advise the Commission on any relevant issue or subject related to its Terms of Reference, and to assist it in the preparation of any paper or research study that would enhance the Commission's understanding of issues in the Terms of Reference.