15th Finance Commission

The 15th Finance Commission, chaired by former Governor N. K. Singh, is the constitutionally mandated body that recalibrates fiscal relations between the Union and the states for the five‑year period 2021‑2026. Constituted on 30 October 2019 under Article 280 of the Constitution, it submitted its report to Parliament on 30 June 2020, introducing a historic 42 percent share of central tax proceeds for states and a suite of targeted grants that reshape India’s fiscal federalism.

Constitutional Basis and Composition

Article 280 empowers the President to appoint a Finance Commission every five years, and the 15th Commission was the first to be formed after the 2019 general elections. Its nine‑member panel comprised N. K. Singh (Chair), Dr C. P. Chandrasekhar (Member, Finance), Prof Ramesh Chand (Member, Economics), and senior bureaucrats including former Revenue Secretary M. R. Kumar, ensuring a blend of political, academic, and administrative expertise. The commission’s tenure was defined to cover the financial years 2021‑22 to 2025‑26, aligning its recommendations with the Union Budget cycle.

Methodology and Core Recommendations

The commission adopted a three‑tiered formula: 50 percent weight to population (2011 Census), 30 percent to income distance (a measure of fiscal capacity), and 20 percent to area, reflecting both equity and efficiency. Based on this, it recommended that states receive Rs 5.86 lakh crore (≈ 42 percent) of the divisible pool of central taxes, up from the 41 percent share in the 14th Commission. It also introduced a “decentralised GST” component, allocating 30 percent of the GST pool directly to states, and earmarked Rs 2,500 crore for a health grant, Rs 1,500 crore for education, and Rs 1,000 crore for disaster relief, each payable over five years.

Implementation, Fiscal Impact and Significance

The Finance Minister, Nirmala Sitharaman, tabled the report in the Lok Sabha on 30 June 2020, and the Union Treasury began disbursing the revised devolution from the FY 2021‑22 onward, with the first instalment of Rs 2.31 lakh crore reaching state coffers in April 2021. Early assessments by the Comptroller and Auditor General indicated a 6‑7 percent increase in states’ fiscal space, enabling higher capital expenditure on infrastructure and social sectors. By raising the states’ share and introducing conditional grants, the 15th Finance Commission marked a decisive shift toward a more balanced fiscal union, reinforcing cooperative federalism while preserving the Centre’s role in macro‑economic stability.