14th Finance Commission (2015-2020) for UPSC | Key Recommendations

14th Finance Commission (2015-2020): Key Recommendations The 14th Finance Commission, chaired by Dr. Y.V. Reddy, introduced significant measures to enhance fiscal federalism and autonomy for states. Alongside revenue-sharing principles, it addressed issues like public utility pricing, GST compensation, and disinvestment. Important Recommendations: Vertical Devolution: Increased states' share in the divisible tax pool from 32% to 42% , marking the largest jump in tax devolution. Horizontal Devolution Formula: Introduced forest cover (7.5%) for the first time to incentivize states maintaining ecological balance. Weightages: Income distance (50%), population (17.5%), area (15%), and demographic changes (10%). Local Governance Strengthening: Recommended grants to local bodies based on population and timely audits, linking fund disbursement to accountability and performance. Sector-Specific and State-Specific Grants: Eliminated these grants, considering them arbitrary and duplicative. Instead, pro…