Intergovernmental Fiscal Relations in India — Centre — State Fiscal Relationship and Finance Commission

A state government builds most of the roads and runs most of the schools you actually use day to day, but the Union government collects a large share of the country's most productive taxes. Someone has to decide how that mismatch is bridged every few years — and the Constitution names exactly who: the Finance Commission.

In two minutes

India's Centre-State fiscal relations are structured by the Constitution to divide taxing powers between the Union and the States, while a periodically constituted Finance Commission recommends how the Union's revenue should be shared with the States, to correct the mismatch between where taxes are collected and where spending responsibilities actually fall.

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