Arvind Panagariya Named As The 16th Finance Commission Chairman

The Central Government has appointed Arvind Panagariya as the Chairman of the 16th Finance Commission. With this, Ritwik Ranjanam Pandey has been made the Secretary of the 16th Finance Commission. The notification said that the names of other members of the commission will be announced soon.

About Arvind Panagariya:

• Arvind Panagariya was the first vice-chairman of NITI Aayog from January 2015 to August 2017.
• Along with this, he recently worked as India's Sherpa during the G20 meeting.
• Has led the Indian team in the G20 meetings during the presidencies of Turkey (2015), China (2016) and Germany (2017).
• Arvind Panagariya, former chief economist of the Asian Development Bank, taught in the Economics Department of the University of Maryland from 1978 to 2003.
• Leading trade economist Panagariya has often been critical of the government's protectionist import rebate policies.
• Panagariya previously served as the chief economist of the Asian Development Bank. Panagariya has also held various positions in the World Bank, International Monetary Fund and UNCTAD.
• Panagariya holds a PhD in Economics from Princeton University.
• In March 2012, the Government of India honoured Panagariya with the Padma Bhushan (the country's third-highest civilian honour).
• Panagariya works as Jagdish Bhagwati, a Professor of Indian Political Economy at Columbia University. He has been a frequent commentator on India's political economy.

Constitution of the 16th Finance Commission (FC):

• Deviating from the tradition till now, the Union Cabinet had on 29 November 2023 approved the scope of work without the FC. The Finance Commission must submit its report by October 31, 2025. The 16th Finance Commission will cover 5 years from April 1, 2026.
• The validity of the 15th Finance Commission headed by NK Singh is till March 31, 2026. Government official Ritwik Ranjanam Pandey has been appointed Secretary of the 16th FC.

Tenure of 16th Finance Commission:

• The 16th FC, constituted by the Central Government, will give its recommendations on disaster management and the distribution of taxes between the Center and the State. The tenure of the members of this Commission is till October 31, 2025 or the submission of the report (whichever is earlier).

About Finance Commission:

The constitutional provision of the Finance Commission:

• The Finance Commission is mentioned in Articles 280 and 281 of the Indian Constitution. It is a semi-judicial and advisory body.

Structure/Constitution of Finance Commission:

• Finance Commission Article 280(1) provides that the Finance Commission shall consist of a Chairman and four other members to be appointed by the President.
• Under Article 280(2), Parliament can appoint the Finance Commission.
• The Parliament has passed the Finance Commission Act, of 1951 to determine the qualifications of the members of the Finance Commission. Under this, the following are the qualifications:
  • The Chairman should be a person who is knowledgeable about public affairs.
  • The other four members must be qualified to be judges of a High Court or
  • They have special knowledge of administration and financial matters or
  • Have specific knowledge of economics.

Function of Finance Commission:

• To recommend to the President of India how the net proceeds of taxes should be distributed between the Union and the States and the allocation of such proceeds among the States.
• Under Article 275, grants/assistance should be given to the states from the Consolidated Fund.
  • Centre and states and distribution of tax within the states
  • Principles governing grants of revenue-in-aid to the States from the Consolidated Fund of India and
  • Recommendations include taking steps regarding supplementary resources to raise funds for Panchayats and Municipalities in the states.
• Any other specific direction given by the President which is in the interest of sound finances of the country.

Powers of Finance Commission:

• The Commission submits its report to the President, tabled before both the Houses of Parliament.
• An explanatory memorandum has to be kept along with the recommendations presented so that the action taken in relation to each recommendation can be known.
• The recommendations made by the Finance Commission are advisory; it depends on whether the government accepts it or not.