What are the recommendations of the Fourteenth Finance Commission with respect to the grant to local governments, fiscal deficit and FRBM Act?
In short
The Fourteenth Finance Commission recommended about Rs 2,87,436 crore in local body grants for 2015-20, a 3% fiscal deficit anchor, and an FRBM Act review with an independent fiscal council. Prudent states could borrow up to 0.5% of GSDP extra.
Model answer
Ghissu Editorial · Verified 4 Oct 2026 · 264 words
Increased Devolution
The FFC raised states’ share in the divisible pool from 32% to 42%, indirectly boosting resources for local bodies mandated by the 73rd and 74th Amendments.
Direct Grants and Incentives
It recommended about Rs 2,87,436 crore in grants for 2015-20, roughly Rs 2,00,292 crore for gram panchayats and Rs 87,144 crore for urban local bodies, with performance grants tied to audited accounts and higher own revenue.
Fiscal Consolidation Roadmap
The FFC targeted Centre’s deficit at 3% of GDP by 2017-18 and anchored states at 3% of GSDP through 2015-20, with up to 0.5% extra for fiscally prudent states.
Revenue Deficit Grants
Allocated about Rs 1,94,821 crore to 11 states including Andhra Pradesh to cover revenue shortfalls.
State Fiscal Realities
Andhra Pradesh’s rising revenue deficits in later years show challenges in fiscal consolidation amid regional disparities.
Development-Linked Fiscal Rules6
Emphasized balancing deficit targets with capital expenditure needs.
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Government Budgeting (Union)15 questions
Asked in 6 of 8 sittings since 2008
Most tested: Finance Commission, deficits, and fiscal consolidation in the Indian federal budget system.
- 2025What do you understand by Government Budget? Briefly explain the types of public expenditure and how these expenditures are classified in the government budget.
- 2025Define the term 'deficit' in government finance. Explain the various types of deficits and their economic implications.
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Question from the official APPSC Group-I Mains 2020 paper. Answer written by Ghissu's engine and checked against our editorial standards. Found an error? Tell us and we correct it within 48 hours.