Finance Commission recommends FRBM Act revamp

The 15th Finance Commission led by NK Singh has recommended setting up a high-powered intergovernmental group to restructure the Fiscal Responsibility and Budget Management Act and oversee its implementation.

The FRBM Act needs to be revamped because of prevailing uncertainty and contemporary realities and challenges, the commission said. The Union and state governments will have to amend their FRBM Acts to ensure their legislations are consistent with the fiscal sustainability framework, it added.

Meanwhile, the government has accepted the commission’s suggestion to set up a non-lapsable defence fund.


To maintain stability of resources, the commission recommended maintaining the vertical devolution at 41%, along with 1% for UTs of Ladakh and Jammu & Kashmir, maintaining it at 42%, as proposed by the 14th Finance Commission. For horizontal devolution, the panel suggested a 12.5% weightage to demographic performance, 45% to income, 15% each to population and area, 10% to forest and ecology and 2.5% to tax and fiscal efforts.

Besides, the commission has suggested states devote more than 8% of their budgets to health by 2022, while calling for performance-based incentives for states.