Discuss the policy initiatives of the Fourteenth Finance Commission aimed towards promising and strengthening agricultural development in India. (2022, 15 Marks)
The Fourteenth Finance Commission (chair Y. V. Reddy; constituted January 2013, report submitted December 2014, award 2015-20) framed no agriculture-specific scheme. Its bearing on agriculture was structural: because agriculture (Entry 14) and water (Entry 17) are State subjects, it chose to widen states’ untied fiscal space and let them set their own farm priorities — a deliberate shift from conditional to trust-based federalism.
How the award touched agriculture
- Higher devolution: states’ share of the divisible pool rose from 32 to 42 per cent, the largest increase ever. Income distance carried 50 per cent weight and forest cover 7.5 per cent, favouring poorer, largely agrarian states.
- No sector-specific grants: the Commission desisted from tied grants, citing poor utilisation and rigid conditions, and left spending choices on irrigation, extension and markets to states.
- Local bodies: grants of ₹2,87,436 crore, of which ₹2,00,292 crore went to gram panchayats (90 per cent basic, 10 per cent performance) for basic services including water supply — supporting rural infrastructure rather than farming directly.
- Disaster relief: a State Disaster Response Fund of ₹61,219 crore with a 90 per cent Union share, and states allowed to spend up to 10 per cent on locally notified disasters — relevant to drought, hailstorm and crop-loss relief.
- Pricing of utilities: it urged Water Regulatory Authorities, volumetric measurement of irrigation water and 100 per cent electricity metering, targeting the inefficiency of free farm power and flat irrigation charges.
- Revenue-deficit grants of about ₹1.94 lakh crore to 11 states cushioned weaker finances.
Did untied devolution help agriculture?
- Yes, in enabling state innovation: Telangana’s Mission Kakatiya (tank restoration, 2015) and Rythu Bandhu investment support (2018), and Odisha’s KALIA scheme, were state-designed and state-funded.
- But gains were partly offset: after 2015 the Union restructured centrally sponsored schemes, so programmes such as the Rashtriya Krishi Vikas Yojana moved to 60:40 cost-sharing; cesses and surcharges outside the divisible pool also shrank effective transfers.
- Spending choices: much new space went into loan waivers, input subsidies and cash support rather than capital formation in irrigation, research and storage.
- Reform advice ignored: water and power pricing recommendations were largely unimplemented, and free farm electricity continues to drain groundwater and discom finances.
The Fifteenth Commission’s corrective
The Fifteenth Finance Commission (N. K. Singh) proposed ₹45,000 crore of performance-based incentives for agricultural reform in 2021-26 — for amending land-leasing laws on NITI Aayog’s model, conserving groundwater, raising agricultural exports and expanding oilseeds, pulses and wood products. The Union did not release them as Commission grants, saying only that it would give “due consideration” to the identified sectors while designing its own schemes; the Sixteenth Commission has since discontinued sector-specific grants altogether.
Conclusion
The Fourteenth Commission promoted agriculture indirectly, by trusting states with money rather than directing it. Untied devolution enabled state-led farm innovation but did not ensure productive investment: without institutional reform of water and power pricing and a steadier Union partnership, fiscal autonomy alone could not transform Indian agriculture.