PolicyRecommendations of the 15th Finance Commission for 2020-21Rohin Garg- February 3, 2020The Finance Commission is a constitutional body formed by the President of India to give suggestions on centre-state financial relations.  The 15thFinance Commission is required to submit two reports.  Thefirst reportwill consist of recommendations for the financial year 2020-21.  The final report with recommendations for the 2021-26 period will be submitted by October 30, 2020. In this post, we explain the key recommendations of the report.What is the amount of tax devolution to the states, and how is it being calculated?The Finance Commission uses certain criteria when deciding the devolution to states.  For example, income distance criterion has been used by the 14thand 15thFinance Commissions.  Under this criterion, states with lower per capita income would be given a higher share to maintain equity among states.  Another example is Demographic Performance criterion which has been introduced by the 15thFinance Commission.  The Demographic Performance criterion is to reward efforts made by states in controlling their population.The 15thFinance Commission used the following criteria while determining the share of states: (i) 45% for the income distance, (ii) 15% for the population in 2011, (iii) 15% for the area, (iv) 10% for forest and ecology, (v) 12.5% for demographic performance, and (vi) 2.5% for tax effort.  For 2020-21, the Commission has recommended a total devolution of Rs 8,55,176 crore to the states, which is 41% of the divisible pool of taxes.  This is 1% lower than the percentage recommended by the 14thFinance Commission.Table 1 below compares the new criteria with the criteria recommended by the 14thFinance Commission.Table 1: Criteria for devolution (2020-21)Criteria14thFC2015-2015thFC2020-21Income Distance50.045.0Population 197117.5-Population 201110.015.0Area15.015.0Forest Cover7.5-Forest and Ecology-10.0Demographic Performance-12.5Tax Effort-2.5Total100100Sources: Report for the year 2020-21, 15thFinance Commission; PRS.Uttar Pradesh and Bihar have received the largest devolutions for 2020-21, receiving Rs 1,53,342 crore, and Rs 86,039 crore respectively.   Karnataka and Kerala saw the largest decreases in the share of the divisible pool with a decrease of 0.49% and 0.25% respectively.  Table 2 below displays the state-wise breakdown of the share in the divisible pool and the total devolution.Table 3: Share of states in the centre’s taxesState14thFinance Commission15thFinance CommissionDevolution for FY 2020-2021Share out of 42%Share in divisible poolShare out of 41%Share in divisible pool(In Rs crore)Andhra Pradesh1.814.311.694.1135,156Arunachal Pradesh0.581.380.721.7615,051Assam1.393.311.283.1326,776Bihar4.069.674.1310.0686,039Chhattisgarh1.293.071.43.4229,230Goa0.160.380.160.393,301Gujarat1.33.11.393.429,059Haryana0.461.10.441.089,253Himachal Pradesh0.30.710.330.86,833Jammu and Kashmir0.781.86---Jharkhand1.323.141.363.3128,332Karnataka1.984.711.493.6531,180Kerala1.052.50.81.9416,616Madhya Pradesh3.177.553.237.8967,439Maharashtra2.325.522.526.1452,465Manipur0.260.620.290.726,140Meghalaya0.270.640.310.776,542Mizoram0.190.450.210.514,327Nagaland0.210.50.230.574,900Odisha1.954.641.94.6339,586Punjab0.661.570.731.7915,291Rajasthan2.315.52.455.9851,131Sikkim0.150.360.160.393,318Tamil Nadu1.694.021.724.1935,823Telangana1.022.430.872.1318,241Tripura0.270.640.290.716,063Uttar Pradesh7.5417.957.3517.931,53,342Uttarakhand0.441.050.451.19,441West Bengal3.087.333.087.5264,301Total42100411008,55,176Sources: Reports of 14thand 15thFinance Commission; PRS.What are the various grants recommended by the 15thFinance Commission?The Terms of Reference of the Finance Commission require it to recommend grants-in-aid to the States.  These grants include: (i) revenue deficit grants, (ii) grants to local bodies, and (iii) disaster management grants.14 states are estimated to face a revenue deficit post-devolution.  To make up for this deficit, the Commission has recommended revenue deficit grants worth Rs 74,341 crore to these 14 states.  Additionally, three states (Karnataka, Mizoram, and Telangana) have received special grants worth Rs 6,674 crore.  The special grants are being given to compensate for a decline in the sum of tax devolution and revenue deficit grants in 2020-21 as compared to 2019-20.The Commission has recommended a total of Rs 90,000 crore for grants to the local bodies in 2020-21.  This amounts to an increase over the Rs 87,352 crore allocated for 2019-20 for the same.  The new allocation is 4.31% of the divisible pool.  Of this sum, Rs 60,750 crore has been recommended for rural local bodies, and Rs 29,250 crore for urban local bodies.  These grants will be made available to all three tiers of Panchayat- village, block, and district.To promote local-level mitigation activities, the Commission has recommended the setting up of National and State Disaster Management Funds.  Recommended grants for the State Disaster Risk Management Fund is Rs 28,983 crore, while the allocation for the National Disaster Risk Management Fund is Rs 12,390 crore.Apart from these, guidelines for performance-based grants and sector-specific grants have been outlined.  The Commission has recommended a grant of Rs 7,375 crore for nutrition in 2020-21.  Sectors for which sector-specific grants will be provided in the final report include: (i) nutrition, (ii) health, (iii) pre-primary education, (iv) judiciary, and (v) railways.For more details, please see oursummaryof the report.Read MoreParliamentFirst no-confidence motion of the 17th Lok Sabha discussed todayNiranjana Menon- August 8, 2023Discussion on the first no-confidence motion of the 17thLok Sabha began today.  No-confidence motions and confidence motions are trust votes, used to test or demonstrate the support of Lok Sabha for the government in power.  Article 75(3) of the Constitution states that the government is collectively responsible to Lok Sabha.  This means that the government must always enjoy the support of a majority of the members of Lok Sabha.  Trust votes are used to examine this support.  The government resigns if a majority of members support a no-confidence motion, or reject a confidence motion.So far, 28 no-confidence motions (including the one being discussed today) and 11 confidence motions have beendiscussed.  Over the years, the number of such motions has reduced.  The mid-1960s and mid-1970s saw more no-confidence motions, whereas the 1990s saw more confidence motions.Figure1: Trust votes in ParliamentNote: *Term shorter than 5 years; **6-year term.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.The no-confidence motion being discussed today wasmovedon July 26, 2023.  A motion of no-confidence is moved with the support of at least 50 members.   The Speaker has the discretion to allot time for discussion of the motion.  TheRules of Procedurestate that the motion must be discussed within 10 days of being introduced.  This year, the no-confidence motion wasdiscussed13 calendar days after introduction.  Since the introduction of the no-confidence motion on July 26, 12 Bills have been introduced and 18 Bills have been passed by Lok Sabha.  In the past, on four occasions, the discussion on no-confidence motions began seven days after their introduction.  On these occasions, Bills and other important issues were debated before the discussion on the no-confidence motion began.Figure2: Members rise in support of the motion of no-confidence in Lok SabhaSource: Sansad TV, Lok Sabha, July 26, 2023; PRS.Figure3: Number of days from introduction to discussion on no-confidence motionsNote: Number of days implies calendar days.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.On average, no-confidence motions (excluding the one being discussed today) have been discussed for 13 hours over three days.  Discussions have lasted longer than 20 hours on four instances, most recently in 2003.  Today’s no-confidence motion was allotted 12 hours discussion time by theBusiness Advisory Committee.Following the discussion, the motion is put to vote.  26 out of 27 no-confidence motions (excluding the one being discussed today) have been voted upon and rejected.  This means that no government has ever had to resign following a vote of no-confidence.   On one occasion, in 1979, the discussion on a no-confidence motion against the Morarji Desai government remained inconclusive.  He resigned before the motion was put to vote.  50% of all no-confidence motions (14 out of 28) were discussed between 1965 and 1975.  Of these, 12 were against governments headed by Indira Gandhi.Figure4: Duration of discussion on no-confidence motionsNote: This graph excludes the no confidence motion moved on July 26, 2023.Source: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.In comparison, confidence motions have a more varied history.  The first motion, brought in 1979 to demonstrate confidence in Charan Singh’s government, was not discussed at all.  The Prime Minister resigned before the discussion could take place.  Since then, 11 confidence motions have been discussed in Lok Sabha, with nine occurring in the 1990s.  During this period, several coalition governments were formed, and Prime Ministers sought to prove their majority throughconfidence motions.   These motions have been discussed, on average, for 12 hours over two days.Figure5: Duration of discussion of confidence motionsSource: Statistical Handbook 2021, Ministry of Parliamentary Affairs; PRS.Of the 11 confidence motions discussed in Lok Sabha, seven were accepted.  On three instances, governments had to resign as they could not prove that they had the support of the majority.  On one instance in 1996, the motion was not put to vote.  Following an eleven-hour discussion on this confidence motion, Prime Minister Atal Bihari Vajpayee announced his intention to resign on the floor of the House.  He resigned 16 days into his term.Vajpayee became Prime Minister again in 1999, and faced another confidence motion.   This time, it was put to vote.   The motion was defeated by a margin of one vote.  This has been the closest result on a trust vote in the history of Lok Sabha.  The next closest result was when a motion of no-confidence against P V Narasimha Rao’s government was defeated by 14 votes in 1993.  In most cases, results have been in favour of the government by a large margin.«12345678910»