16th Finance Commission constitutes five-member advisory council

The Sixteenth Finance Commission on Tuesday constituted an advisory council with five members to advise the Commission on any of the Terms of Reference (ToR) or related subjects, a press statement said.

Poonam Gupta, Director General of the National Council of Applied Economic Research, has been appointed as the convenor of the Advisory Council. The other members include economists D.K. Srivastava, Neelkanth Mishra, Pranjul Bhandari, and Rahul Bajoria.

Mishra holds the position of chief economist of Axis Bank currently, while Bhandari is the Chief India Economist at HSBC Securities & Capital Markets. Srivastava is the chief policy advisor at EY, and Bajoria is MD & Head of EM Asia (ex-China) Economics at Barclays.

The role and functions of the advisory council would include assisting the Commission in the preparation of papers or research studies and monitoring or assessing studies commissioned by the FC, thereby enhancing the Commission's understanding of the issues in its ToR.

The council would also help broaden the Commission's ambit and understanding by seeking the best national and international practices on matters pertaining to fiscal devolution and improving the quality, reach, and enforcement of its recommendations.

The distribution of the net proceeds of taxes between the Union and states under Chapter I, Part XII of the Constitution and the allocation of the respective shares of such proceeds between states are among the Terms of Reference (ToR) approved by the Cabinet.

Another ToR is about the principles governing the grants-in-aid of the revenues of states out of the Consolidated Fund of India and the sums to be paid to states by way of grants-in-aid of their revenues.

The finance commission, as per the ToR, would also suggest measures needed to augment the Consolidated Fund of a State to supplement the resources of panchayats and municipalities.

The Finance Commission is a constitutionally mandated body established once every five years to devise a formula for distributing net tax proceeds between the Centre and the states as well as among states and local bodies. Currently, India shares 41 per cent of federal taxes with states as recommended by the 15th panel.