Page 345 - DECO502_INDIAN_ECONOMIC_POLICY_ENGLISH

Unit 26: 12 and 13 Finance Commissions
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• Basic cause of all these upheavals is the formula adopted by the 13 Finance Commission to Notes
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decide the share of different states in devolution of Union Taxes. The 13 Finance Commission
made radical changes in the formula for devolution such that more deprived states are put at
loss and better off are given more resources.
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• 12 Finance commission had given 7.5 per cent importance to fiscal discipline and in 13th Finance
Commission its importance has been enhanced to 17.5 percent. It is worth noting that this factor
was absent in 10 Finance Commission.
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• Now that poorer states would receive less money from the central taxes, the aspirations of the
residents of those poorer states would remain unfulfilled.
26.4 Key-Words

1. Panchayats : The word "panchayat" literally means "assembly" (ayat) of five (panch) wise
and respected elders chosen and accepted by the local community. However,
there are different forms of assemblies. Traditionally, these assemblies settled
disputes between individuals and villages. Modern Indian government has
decentralized several administrative functions to the local level, empowering
elected gram panchayats. Gram panchayats are not to be confused with the
unelected khap panchayats (or caste panchayats) found in some parts of India.
2. Municipalities : A municipality is usually an urban administrative division having corporate
status and usually powers of self-government. The term municipality is also
used to mean the governing body of a municipality.
26.5 Review Questions

1. Discuss the term 12th finance commission.
2. Write a short note on the local bodies.
3. Why the 13th finance commission was instituted ? Discuss the recommendations made in the
thirteenth finance commission.
Answers: Self-Assessment

1. (i)(d) (ii)(b) (iii)(a) (iv)(d) (v)(c)
(vi)(b) (vii)(c)
26.6 Further Readings

1. The Indian Economy; S.K. Ray; Prentic, Hall of India Private Limited
New Delhi - 110001.
2. Indian Economy; Gaurav Datt and Aswani Mahajan; S. Chand and Company
LTD. Ram Nagar, New Delhi-110055.

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