Former RBI governor Y V Reddy to head 14th Finance Commission

Y V Reddy, a former governor of the Reserve Bank of India (RBI), will be the chairman of the 14th Finance Commission, finance minister P Chidambaram said today.

Finance Commission, a constitutional body, is set up every five years. It makes recommendations on sharing of central taxes with states, and for determining grants-in-aid for states and local bodies for a five-year period beginning 1 April 2014. Apart from these, it also has to address contemporary economic challenges.

With the country going through a phase of low growth and high inflation – with only 5.5-6 per cent growth expected in 2012-13 – the 14th Finance Commission might well be asked to examine strategies to stimulate growth that is stable and equitable.

Besides, the central and state governments fighting rising fiscal deficits relative to GDP and GSDP, respectively, are struggling to achieve some balance on the revenue account.

Prior to joining RBI as its governor in September 2003, Reddy was India's executive director on the board of the International Monetary Fund.

The Finance Commission has been asked to submit its report by 31 October 2014.

The 13th Finance Commission was headed by former Finance Secretary Vijay Kelkar. It was tasked with suggesting measures to maintain a stable and sustainable fiscal environment consistent with equitable growth.