Mention the recommendations of the 15th Finance Commission with respect to Fiscal Consolidation. Discuss the progress and present situation of 'Fiscal Consolidation' in India.
In short
The 15th Finance Commission urged FRBM compliance, a medium-term debt roadmap, disclosure of off-budget borrowings and a statutory public financial management framework, keeping states' tax share at 41%. The Union fiscal deficit fell from about 9.5% of GDP in 2020-21 to about 4.8% in 2024-25.
Model answer
Ghissu Editorial · Verified 4 Oct 2026 · 268 words
Fiscal Deficit and Debt Management
The Commission emphasized adherence to FRBM fiscal deficit and debt targets, advocating a credible medium-term debt consolidation plan.
Tax Devolution and Grants
It maintained a 41% central tax share6 for states, revised criteria using 2011 census data, and recommended over ₹10 lakh crore in grants for states and local bodies.
Rising Deficits and Debt
Fiscal deficit rose to 9.5% of GDP in 2020-21, with government debt nearing 90% of GDP, complicating consolidation.
Off-Budget Borrowings
The Commission highlighted off-budget borrowings obscuring fiscal deficits, urging full disclosure and phased elimination.
State Fiscal Management Issues
Andhra Pradesh CAG audits revealed ₹968 crore excess payments, ₹1,806 crore revenue impact from tax and land irregularities, and ₹2,772 crore outstanding audit observations.
GST Revenue Volatility
GST implementation caused revenue shortfalls and dependence on Centre compensation, affecting fiscal stability.
Broaden Tax Base and Improve Administration
Enhancing tax administration, especially in Andhra Pradesh, will boost revenues without raising rates.
Enhance Transparency
Full disclosure and elimination of off-budget borrowings are essential for fiscal clarity.
Empower Local Bodies
Strengthening fiscal transfers and capacity building for local governments will ease state fiscal pressures.
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Government Budgeting (Union)15 questions
Asked in 6 of 8 sittings since 2008
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Question from the official APPSC Group-I Mains 2023 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.