Resource Transfer To Himachal Pradesh Through The Finance Commissions

The question of central support to Himachal Pradesh keeps coming up time and again and the lack of appreciation on the part of various interest groups creates impressions which are far from the truth. As is well known, the two major platforms through which the financial resources are transferred to the States are the Finance Commissions and the Planning Commission.

The Finance Commissions are statutory bodies constituted every five years and are responsible for determining the tax sharing design between the centre and the States on the one hand, and among the States, on the other. The former apportionment is called the vertical devolution in the context of the States and the latter is called the horizontal distribution. Apart from determining the tax sharing design, the Finance Commission also assesses the own resources in totality; and the expenditure needs specifically for the non-plan revenue account of the States. Towards meeting the assessed non-plan revenue expenditure (NPRE), the Finance Commission balances it against the assessed the tax and non-tax revenue receipts of the State, the share of central tax for each State and even after pooling these, if any gap still remains in fully meeting the assessed NPRE commitments, the Finance Commission also recommends revenue deficit grants(RDG).Read Full Story