{"id":21089,"date":"2024-01-03T12:03:29","date_gmt":"2024-01-03T12:03:29","guid":{"rendered":"https:\/\/edukemy.com\/blog\/?p=21089"},"modified":"2024-01-03T12:03:32","modified_gmt":"2024-01-03T12:03:32","slug":"finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024","status":"publish","type":"post","link":"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/","title":{"rendered":"Finance Commission Role in Addressing State Fiscal Challenges\u00a0&#8211; UPSC Daily Editorial Analysis &#8211; 03rd January 2024"},"content":{"rendered":"\n<figure class=\"wp-block-image size-full is-resized\"><a href=\"https:\/\/edukemy.com\/current-affairs\" target=\"_blank\" rel=\"noreferrer noopener\"><img fetchpriority=\"high\" decoding=\"async\" src=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2023\/10\/MicrosoftTeams-image-40-1.png\" alt=\"UPSC Current Affairs Daily Quiz - Edukemy\" class=\"wp-image-14085\" width=\"780\" height=\"182\" srcset=\"https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2023\/10\/MicrosoftTeams-image-40-1.png 1280w, https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2023\/10\/MicrosoftTeams-image-40-1-1170x274.png 1170w, https:\/\/edukemy.com\/blog\/wp-content\/uploads\/2023\/10\/MicrosoftTeams-image-40-1-585x137.png 585w\" sizes=\"(max-width: 780px) 100vw, 780px\" \/><\/a><\/figure>\n\n\n\n<p>The Finance Commission plays a pivotal role in addressing state fiscal challenges by serving as an unbiased arbitrator in the distribution of financial resources between the central and state governments. Through its recommendations, the commission aims to achieve a fair and equitable distribution of funds, taking into account the specific needs and challenges faced by each state. By analyzing the economic and fiscal conditions of states, the Finance Commission helps in formulating a balanced fiscal framework that ensures financial stability and promotes sustainable development. Moreover, its role extends beyond mere allocation, encompassing reforms and policy suggestions to enhance states&#8217; revenue-generating capacities and fiscal management. In essence, the Finance Commission acts as a crucial instrument in fostering cooperative federalism and ensuring that states receive the necessary support to overcome fiscal hurdles and promote overall economic growth.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><strong>Tag: <\/strong>GS-2 Governance\u00a0<\/p><\/blockquote>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_73 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<label for=\"ez-toc-cssicon-toggle-item-69d736763a01e\" class=\"ez-toc-cssicon-toggle-label\"><p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d736763a01e\"  \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#In_News\" title=\"In News:\">In News:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Addressing_the_Need_to_Curb_Populism_in_India\" title=\"Addressing the Need to Curb Populism in India&nbsp;\">Addressing the Need to Curb Populism in India&nbsp;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Fiscal_Imbalance\" title=\"Fiscal Imbalance\u00a0\">Fiscal Imbalance\u00a0<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Rising_Debt\" title=\"Rising Debt\u00a0\">Rising Debt\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Higher_Deficit\" title=\"Higher Deficit\u00a0\">Higher Deficit\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Revenue_Shortfalls\" title=\"Revenue Shortfalls\u00a0\">Revenue Shortfalls\u00a0<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Economic_Distortions\" title=\"Economic Distortions\u00a0\">Economic Distortions\u00a0<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Investment_Decline\" title=\"Investment Decline\u00a0\">Investment Decline\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Job_Growth_Stagnation\" title=\"Job Growth Stagnation\u00a0\">Job Growth Stagnation\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Market_Inefficiency\" title=\"Market Inefficiency\u00a0\">Market Inefficiency\u00a0<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Erosion_of_Governance\" title=\"Erosion of Governance\u00a0\">Erosion of Governance\u00a0<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Increase_in_Corruption\" title=\"Increase in Corruption\u00a0\">Increase in Corruption\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Declining_Transparency\" title=\"Declining Transparency\u00a0\">Declining Transparency\u00a0<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Populist_Policies_Aggravating_the_Debate\" title=\"Populist Policies Aggravating the Debate&nbsp;\">Populist Policies Aggravating the Debate&nbsp;<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Reversion_to_Old_Pension_Scheme_OPS\" title=\"Reversion to Old Pension Scheme (OPS)\u00a0\">Reversion to Old Pension Scheme (OPS)\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Rising_States_Fiscal_Deficit\" title=\"Rising States\u2019 Fiscal Deficit\u00a0\">Rising States\u2019 Fiscal Deficit\u00a0<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Finance_Commissions_Role_in_Curbing_Populism\" title=\"Finance Commission&#8217;s Role in Curbing Populism&nbsp;\">Finance Commission&#8217;s Role in Curbing Populism&nbsp;<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Performance-Based_Incentives\" title=\"Performance-Based Incentives\u00a0\">Performance-Based Incentives\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Objective_Criteria_for_Populist_Measures\" title=\"Objective Criteria for Populist Measures\u00a0\">Objective Criteria for Populist Measures\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-20\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Fiscal_Efficiency_Parameters\" title=\"Fiscal Efficiency Parameters\u00a0\">Fiscal Efficiency Parameters\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-21\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Public_Awareness\" title=\"Public Awareness\u00a0\">Public Awareness\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-22\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Stress_on_Future_Implications\" title=\"Stress on Future Implications\u00a0\">Stress on Future Implications\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-23\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Consensus_Building\" title=\"Consensus Building\u00a0\">Consensus Building\u00a0<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-24\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Regular_Review_and_Recommendations\" title=\"Regular Review and Recommendations\u00a0\">Regular Review and Recommendations\u00a0<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-25\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Conclusion\" title=\"Conclusion&nbsp;\">Conclusion&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-26\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Frequently_Asked_Questions_FAQs\" title=\"Frequently Asked Questions (FAQs)\">Frequently Asked Questions (FAQs)<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-27\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#1_FAQ_What_is_the_primary_responsibility_of_the_Finance_Commission_in_addressing_state_fiscal_challenges\" title=\"1. FAQ: What is the primary responsibility of the Finance Commission in addressing state fiscal challenges?\">1. FAQ: What is the primary responsibility of the Finance Commission in addressing state fiscal challenges?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-28\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#2_FAQ_How_does_the_Finance_Commission_contribute_to_overcoming_fiscal_challenges_at_the_state_level\" title=\"2. FAQ: How does the Finance Commission contribute to overcoming fiscal challenges at the state level?\">2. FAQ: How does the Finance Commission contribute to overcoming fiscal challenges at the state level?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-29\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#3_FAQ_Can_the_Finance_Commission_assist_states_in_achieving_long-term_fiscal_sustainability\" title=\"3. FAQ: Can the Finance Commission assist states in achieving long-term fiscal sustainability?\">3. FAQ: Can the Finance Commission assist states in achieving long-term fiscal sustainability?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-30\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#In_case_you_still_have_your_doubts_contact_us_on_9811333901\" title=\"In case you still have your doubts, contact us on 9811333901.&nbsp;\">In case you still have your doubts, contact us on 9811333901.&nbsp;<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-31\" href=\"https:\/\/edukemy.com\/blog\/finance-commission-role-in-addressing-state-fiscal-challenges-upsc-daily-editorial-analysis-03rd-january-2024\/#Visit_our_YouTube_Channel_%E2%80%93_here\" title=\"Visit our YouTube Channel &#8211;&nbsp;here\">Visit our YouTube Channel &#8211;&nbsp;here<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In_News\"><\/span><strong>In News: <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A recent article suggests that the 16th Finance Commission of India ought to prioritize fiscal efficiency and discipline in its devolution formula, aiming to restrain the populist inclinations of state governments.\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Addressing_the_Need_to_Curb_Populism_in_India\"><\/span><strong>Addressing the Need to Curb Populism in India<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Fiscal_Imbalance\"><\/span><strong>Fiscal Imbalance<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Rising_Debt\"><\/span><strong>Rising Debt<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>From 2014 to 2022, states like Andhra Pradesh and Tamil Nadu witnessed a surge in the average debt-to-GDP ratio, reaching 34.5%.&nbsp;<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Higher_Deficit\"><\/span><strong>Higher Deficit<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>Populist spending on free electricity, loan waivers, and social welfare schemes led to a combined fiscal deficit of 4.1% of GDP in 2021-22.&nbsp;<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Revenue_Shortfalls\"><\/span><strong>Revenue Shortfalls<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>Tax revenues lagged behind populist spending, requiring states to rely heavily on central government bailouts or borrowing.&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Economic_Distortions\"><\/span><strong>Economic Distortions<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Investment_Decline\"><\/span><strong>Investment Decline<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>Populist policies, such as price controls, contributed to a 10% decline in Foreign Direct Investment (FDI) in 2022.&nbsp;<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Job_Growth_Stagnation\"><\/span><strong>Job Growth Stagnation<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>Despite increased government spending, the unemployment rate remained above 7% in 2023.&nbsp;<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Market_Inefficiency\"><\/span><strong>Market Inefficiency<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>Price controls in sectors like agriculture disrupted supply chains and impacted consumer welfare.&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Erosion_of_Governance\"><\/span><strong>Erosion of Governance<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Increase_in_Corruption\"><\/span><strong>Increase in Corruption<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>Populist rhetoric correlated with a drop in India&#8217;s Transparency International Corruption Perception Index ranking from 80 in 2014 to 85 in 2022.&nbsp;<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Declining_Transparency\"><\/span><strong>Declining Transparency<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>States with strong populist leaders showed a downward trend in transparency, as indicated by the Public Affairs Index.&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Populist_Policies_Aggravating_the_Debate\"><\/span><strong>Populist Policies Aggravating the Debate<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reversion_to_Old_Pension_Scheme_OPS\"><\/span><strong>Reversion to Old Pension Scheme (OPS)<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>Some states reverted to OPS, incurring indefinite liabilities toward employee pensions, compared to the limited liability of the New Pension Scheme (NPS) introduced in 2004.&nbsp;<\/li><li>An RBI study suggests OPS results in 4.5 times more liability by 2060, restricting growth and compromising future generations&#8217; interests.&nbsp;<\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Rising_States_Fiscal_Deficit\"><\/span><strong>Rising States\u2019 Fiscal Deficit<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<ul class=\"wp-block-list\"><li>States&#8217; deficits increased due to subsidies for populist measures like free electricity, with an average spending on subsidies at 0.87% of Gross State Domestic Product (GSDP).&nbsp;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Finance_Commissions_Role_in_Curbing_Populism\"><\/span><strong>Finance Commission&#8217;s Role in Curbing Populism<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Performance-Based_Incentives\"><\/span><strong>Performance-Based Incentives<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>The 15th Finance Commission proposed measurable incentives linked to specific outcomes, encouraging responsible governance and discouraging populist measures.&nbsp;<\/li><li>Article 280(3) allows the Finance Commission to address issues in the interest of sound finance.&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Objective_Criteria_for_Populist_Measures\"><\/span><strong>Objective Criteria for Populist Measures<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>The Finance Commission can work on developing objective criteria for categorizing populist and non-populist measures, considering diverse developmental needs.&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Fiscal_Efficiency_Parameters\"><\/span><strong>Fiscal Efficiency Parameters<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>The Finance Commission can give more weight to fiscal efficiency in its transfer criteria, emphasizing fiscal consolidation and tax effort.&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Public_Awareness\"><\/span><strong>Public Awareness<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>By creating public awareness about the consequences of populist measures, the Finance Commission can contribute to informed public discourse and pressure political parties to adopt responsible fiscal policies.&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Stress_on_Future_Implications\"><\/span><strong>Stress on Future Implications<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>The Finance Commission can highlight the long-term consequences of populist measures, recommending measures to prevent states from borrowing beyond their capacity.&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Consensus_Building\"><\/span><strong>Consensus Building<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>Acting as a mediator, the Finance Commission can foster dialogue between the Centre and States, promoting cooperative federalism in fiscal matters.&nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Regular_Review_and_Recommendations\"><\/span><strong>Regular Review and Recommendations<\/strong>\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\"><li>The Finance Commission can continually review the financial health of states, making periodic recommendations based on evolving economic scenarios.&nbsp;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A collaborative approach between the Centre and States, guided by the Finance Commission, is crucial to addressing the challenges posed by populist policies and ensuring responsible fiscal governance.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><div class=\"pcrstb-wrap\"><table><tbody><tr><td><strong>UPSC Previous Year Questions<\/strong>\u00a0<br><strong>Prelims (2010)<\/strong>\u00a0<br><strong>Q. Consider the following actions by the Government:\u00a0<\/strong>\u00a0<br>Cutting the tax rates.\u00a0<br>Increasing the government spending.\u00a0<br>Abolishing the subsidies in the context of economic recession.\u00a0<br><strong>which of the above actions can be considered a part of the \u201cfiscal stimulus\u201d package?<\/strong>\u00a0<br><strong>(a)<\/strong>\u202f1 and 2 only\u00a0<br><strong>(b)<\/strong>\u202f2 only\u00a0<br><strong>(c)<\/strong>\u202f1 and 3 only\u00a0<br><strong>(d)<\/strong>\u202f1, 2 and 3\u00a0<br><strong>Ans: (a)<\/strong>\u00a0<br><strong>Mains (2015)<\/strong>\u00a0<br><strong>Q.<\/strong>\u202fIn what way could the replacement of price subsidy with direct benefit Transfer (DBT) change the scenario of subsidies in India? Discuss.\u00a0<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.thehindubusinessline.com\/opinion\/finance-panel-should-curb-populism\/article67696119.ece\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>BL<\/strong><\/a>\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions_FAQs\"><\/span>Frequently Asked Questions (FAQs)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_FAQ_What_is_the_primary_responsibility_of_the_Finance_Commission_in_addressing_state_fiscal_challenges\"><\/span><strong>1. FAQ: What is the primary responsibility of the Finance Commission in addressing state fiscal challenges?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Answer: The Finance Commission is primarily tasked with recommending the distribution of financial resources between the central and state governments. By assessing the economic and fiscal conditions of states, it aims to ensure a fair and balanced allocation that addresses each state&#8217;s specific fiscal challenges.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_FAQ_How_does_the_Finance_Commission_contribute_to_overcoming_fiscal_challenges_at_the_state_level\"><\/span><strong>2. FAQ: How does the Finance Commission contribute to overcoming fiscal challenges at the state level?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Answer: The Finance Commission goes beyond mere fund allocation. It plays a crucial role in suggesting reforms and policies to enhance states&#8217; revenue-generating capacities and improve fiscal management. Through its recommendations, the commission seeks to create a sustainable fiscal framework that promotes economic growth and financial stability at the state level.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_FAQ_Can_the_Finance_Commission_assist_states_in_achieving_long-term_fiscal_sustainability\"><\/span><strong>3. FAQ: Can the Finance Commission assist states in achieving long-term fiscal sustainability?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Answer: Yes, the Finance Commission&#8217;s recommendations are designed to foster long-term fiscal sustainability. By analyzing states&#8217; fiscal health, the commission provides insights and suggestions for reforms that aim to strengthen states&#8217; ability to generate revenue, manage finances efficiently, and overcome fiscal challenges in the long run, promoting overall economic development.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In_case_you_still_have_your_doubts_contact_us_on_9811333901\"><\/span><strong>In case you still have your doubts, contact us on 9811333901.<\/strong>&nbsp;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For UPSC Prelims Resources,&nbsp;<a href=\"https:\/\/edukemy.com\/upsc-cse-prelims-resource-centre\" target=\"_blank\" rel=\"noreferrer noopener\">Click here<\/a><\/p>\n\n\n\n<p>For Daily Updates and Study Material:<\/p>\n\n\n\n<p>Join our Telegram Channel &#8211;&nbsp;<a href=\"https:\/\/t.me\/WithEdukemy4IAS\" target=\"_blank\" rel=\"noreferrer noopener\">Edukemy for IAS<\/a><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>1. Learn through Videos &#8211;&nbsp;<a href=\"https:\/\/bit.ly\/3vOD8sU\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><li>2. Be Exam Ready by Practicing Daily MCQs &#8211;&nbsp;<a href=\"https:\/\/bit.ly\/3Q9z2nF\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><li>3. Daily Newsletter &#8211; Get all your Current Affairs Covered &#8211;&nbsp;<a href=\"https:\/\/bit.ly\/3bE2y5J\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><li>4. Mains Answer Writing Practice &#8211;&nbsp;<a href=\"https:\/\/bit.ly\/3mZuVxl\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><\/li><\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Visit_our_YouTube_Channel_%E2%80%93_here\"><\/span>Visit our YouTube Channel &#8211;&nbsp;<a href=\"https:\/\/www.youtube.com\/@ShabbirsEduKemyforIAS\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a><span class=\"ez-toc-section-end\"><\/span><\/h4>\n","protected":false},"excerpt":{"rendered":"<p>The Finance Commission plays a pivotal role in addressing state fiscal challenges by serving as an unbiased arbitrator in the distribution of financial resources between the central and state governments. <\/p>\n","protected":false},"author":17,"featured_media":21091,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_eb_attr":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[352],"tags":[161,169,1242,232,140],"class_list":["post-21089","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-daily-editorial-analysis","tag-daily-current-affairs-upsc","tag-daily-editorial-analysis","tag-finance-commission","tag-upsc","tag-upsc_preparation_strategy"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts\/21089","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/comments?post=21089"}],"version-history":[{"count":1,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts\/21089\/revisions"}],"predecessor-version":[{"id":21092,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/posts\/21089\/revisions\/21092"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/media\/21091"}],"wp:attachment":[{"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/media?parent=21089"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/categories?post=21089"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/edukemy.com\/blog\/wp-json\/wp\/v2\/tags?post=21089"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}