Basis Guide on National Finance Commission: Significance & Functions

Basis Guide on National Finance Commission

Those who are fiscal management students and those who have a strong grip on the subject of finance know the very well importance and the functions of the National Finance Commission. If you are an aspirant for a government exam and want to play a pivotal role in the National Finance Commission as a government employee then you should know the basics of Fiscal Management and about Prestigious National Finance Commission.

The main purpose of the National Finance Commission is the allocation of financial resources among the other federation units of a country. Moreover, its name reflects that its work is to devise complex economic policies and also shape financial mechanisms.

Its understanding not only benefits the aspirants or job holders but also the basics of NFC are essential for every citizen who is concerned with the equitable distribution of resources and the functioning of government.

What is the national finance commission?

The National Finance Commission is a constitutional body that takes the responsibility of devising principles and procedures that are necessary for the distribution of financial resources between the different units of a Federal government. In some countries, the role of NFC is also to distribute equal funds to the constituent units such as provinces and States.

It is established under the provision of the Constitution and it embodies the spirit of fiscal federalism. It aims to ensure a fair and transparent distribution of funds and it promotes economic stability and regional development.

Functions of the National Finance Commission

The primary function of a national finance commission is summarised by the following four steps:

Resource Allocation

As mentioned above the major and the key function of NFC is to determine the share of a financial resource that each federating unit should receive from the federal treasure. This allocation is based on multiple factors that include the population size revenue capacity of the funding and development needs.

Revenue Distribution

The second key function of NFC is to determine the overall share of the resources. The competent authority of NFC formulas mechanisms for the distribution of different types of revenue such as taxi grants and royalties among the federal and provincial governments.

Criteria Development

NFC also devices criteria and parameters for the equitable distribution of all the resources and it takes into account factors such as population density poverty levels in also infrastructure development requirements.

Review and Revision:

Periodically the NFC also conducts reviews and assessments of its recommendations to ensure the relevance and effectiveness of its plans.

Evolution of NFC

Since its inception, the National Finance Commission has evolved in response to the changing dynamics of government and the laws of fiscal management. Over the past few years, The postman run around amendments and revenge have been made to make it more functional and the change in procedures and composition reflects the evolving needs and aspirations of the people.


  1. What is the purpose of NFC?

The purpose of NFC is to devise principles and procedures for the fair distribution of financial resources between the federal and provincial units.

  1. How often does the NFC meet?

The NFC typically meets periodically as needed to review and formulate recommendations for the distribution of financial resources among the federating units.

  1. How does the NFC determine the allocation of resources?

The NFC considers different factors such as population size in Russian capacity and the overall development needs of a fed rating unit to determine the allocation of a resource.

  1. Can the recommendation of the NFC be revised?

Yes the recommendation of the NFC can be revised and reviewed so that the relevance and effectiveness can be maintained in changing economic and development conditions.

  1. What is the role of NFC in promoting regional development?

The NFC plays a crucial role in promoting regional development by ensuring that the available financial resources are allocated fairly and equally among the different federating units of a country.

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