The Union Cabinet chaired by Prime Minister Shri Narendra Modi today approved the Fifteenth Finance Commission to submit first report for the first fiscal year viz. 2020-21 and to extend the tenure of XV-FC to provide for the presentation of the final report covering FYs 2021-22 to 2025-26 by 30th October, 2020.

The extension of the term will enable the Commission to examine various comparable estimates for financial projections in view of reforms and the new realities to finalise its recommendations for the period 2020-2026.

The Commission, on account of the restrictions imposed by the Model Code of Conduct, completed its visit to States only recently.  This has had a bearing on the detailed assessments of States requirements.

The Terms of Reference for the commission are wide-ranging in nature. Comprehensively examining their implications and aligning them to the requirements of the States and the Central Government will require additional time.

The proposed increase in coverage of the period for which the Commission’s recommendations are applicable, will help medium-term resource planning for the State Governments and the Central Government.  Making a five year coverage available for the Commission beyond 1st April 2021, will help both State and Central Governments design schemes with medium to long term financial perspective and provide adequate time for mid-course evaluation and correction.  It is anticipated that the impact of the economic reforms initiated in the current FY would be manifested in the data by the end of First Quarter 2020-21.

Extension of Finance Commission term allows broader coverage for medium term fiscal planning and improved state assessment. Approval was granted to extend the Fifteenth Finance Commission's tenure and expand its coverage to permit submission of an initial report for the first fiscal year and a final report covering an extended five year period, so the Commission can incorporate reform impacts, complete delayed state assessments, and comprehensively address its wide Terms of Reference to improve medium term resource planning and fiscal recommendations for Central and State Governments.