Editor's Pick: understanding the 15th FC's recommendations

The Hindu Newsletter - Newsletter - subject [The Hindu Logo]( [Facebook]( [Twitter]( [Youtube]( [Linkedin]( [Instagram]( Sunday 14, February 2021 [alt_text]( Editor's Pick The Finance Commission's words of advice for the States [alt_text]( (The Editor's Pick is a new newsletter from The Hindu that provides a snapshot of the most important stories from today's edition of our newspaper, along with a note from our top editors on why we chose to give prominence to these stories.) Chairman of the 15th Finance Commission N.K. Singh has pushed for the Centre to incentivise States to disinvest in their public sector holdings. In an i[nterview to the The Hindu](, Mr. Singh said that the States should have more transparency on the state of their finances, on the lines of the Centre acknowledging that it had a 9.5% fiscal deficit in 2020-21. He said that this, and coming clear on their off-budget borrowings, will boost investor confidence in the country. The report of [15th Finance Commission for the period from 2021-22 to 2025-26]( was tabled in Parliament along with the [Budget](. The Commission's recommended fiscal deficit target for the country is 4% by 2025-26, though Finance Minister Nirmala Sitharaman said that the government is aiming for 4.5% by that year. She said that the fiscal deficit target for 2021-22 is 6.8%. Considering the [pandemic](situation, the Commission has recommended a relaxed fiscal deficit target of 4% for States for 2021-22, with a 0.5% addition for undertaking power sector reforms. Even by conservative estimates, States have considerably overshot their fiscal deficit targets in 2021-22.The Commission had also envisaged in its report a Defence and Internal Security Modernisation Fund with an outlay of ₹2.38 lakh in the 2021-26 period. This fund, which will help the defence and internal security departments fill the gap between budget requirements and allocations, have been approved in principle by the Centre. There have been concerns raised by the States that this fund may cause a reduction in the funds allotted to them. In the interview, Mr. Singh explains that the fund will be sourced from the Gross Revenue Receipts of the Centre and not the divisible Gross Tax Revenue. The 15th Finance Commission was mandated to use the [2011 census data]( while calculating the fund allocations, instead of the 1971 data used by previous commissions. This had led to criticisms from States that had brought their population under control that they will be penalised for doing so in the demography-based allocations. Mr. Singh explained that the commission had given weightage for demographic management in the allocation. The wide gap between the fiscal deficit targets set by the Commission for the Centre and the States and their current position makes this story important. So also does Mr. Singh's recommendation of more disinvestment by the States, and his explanations on the defence fund and how the commission has handled the census issue. Was this newsletter forwarded to you? Head over to our newsletter subscription page to sign up for Editor's Pick and more. [Click here]( Try out The Hindu's daily news quiz Who is set to become the Leader of the Opposition in the Rajya Sabha, as incumbent Ghulam Nabi Azad's term ends February 15? 1. Mallikarjun Kharge 2. Anand Sharma 3. Salman Khurshid 4. Shashi Tharoor To find out the answer and play the full quiz, [click here]( The Big Story [Finance Minister backs outlays for health, defence]( [alt_text]( From the Front Page [alt_text]( [YouTubers are back to tickle Kashmir Valley’s funny bone]( [alt_text]( [Incentivise States for disinvestment in public sector enterprises: Finance Commission chief]( Profiles [alt_text]( [V.K. Sasikala | A shadow in search of eminence]( [alt_text]( [Pangong Tso | The heights of constant friction]( Literary Review [That #wonderful world of Booksta](gram Radhika Santhanam [‘The Age of Pandemics’ review]( Rosamma Thomas You are receiving this email because you are a user of [thehindu.com]( If you do not wish to receive any such emails, [unsubscribe here.](mailto:rm-0bfh1wz6bf2f90kaup33rtbysa8hkcj@newsalert.thehindu.com?subject=Unsubscribe&body=You will be unsubscribed from our mailing list.) To ensure you continue to receive emails from The Hindu in your inbox, please add newsletters.th@newsalert.thehindu.com to your contact. If you can't see the mailer, please [click here.]( Group Sites [The Hindu]( | [இந்து தமிழ் திசை]( | [Business Line]( | [BL on Campus]( | [Sportstar]( | [Frontline]( | [The Hindu Centre]( | [Images]( | [roofandfloor]( | [Classifieds]( Copyright @ 2021 ,THG PUBLISHING PVT LTD. [About Us]( | [Contact Us]( | [Digital Subscription](