Finance and Economy Growth

Finance and Economy Growth

Finance

The Ministry of Finance is responsible for the administration of the finances of the government. It is concerned with all economic and financial matters affecting the country as a whole, including the mobilisation of resources for development and other purposes. It regulates the expenditure of the government, including the transfer of resources to the states.

Department of Economic Affairs

The Department of Economic Affairs is the nodal agency of the government to formulate and monitor the country's economic policies and programmes having a bearing on domestic and international aspects of economic management.

A principal responsibility of this Department is the preparation and presentation of the Union Budget (including Railway Budget) to the Parliament and the Budget for the state governments under President's Rule and union territory administrations.

Economic Growth

As per the provisional estimates (PE) of annual national income released by the National Statistical Office, real GDP growth for 2022-23 stood at 7.2%, higher than the 7% projected growth based on second advance estimates (SAE).

The real GDP growth for 2022-23 is higher compared to the growth projections by various international agencies, reflecting the strong resilience of the Indian economy.

• The Industrial sector witnessed a growth of 4.4% in 2022-23, compared to a growth of 11.6% in 2021-22.

• The Services sector witnessed a growth of 9.5% in 2022-23, compared to a growth of 8.8% in 2021-22.

• Real GVA in the Services sector completely recovered the pre-pandemic level in 2022-23.

Finance Commission

Finance Commission is a constitutional body, constituted by the President under Article. 280 of the Constitution. Since Independence, 15 Finance Commissions have submitted their reports.

• 1st Finance Commission was constituted under the chairmanship of K. C. Neogi.

• The 15th Finance Commission (2020-25) was constituted in November 2017 with N.K. Singh as the Chairman.

• The 16th Finance Commission (2025-2030) was constituted in December 2023 with Arvind Pangariya as the Chairman.

Recommendations of the 15th Finance Commission

The Fifteenth Finance Commission (XV FC) has recommended devolution to all tiers of the Panchayati Raj, including the Traditional Bodies of Non-Participatory IX States of Fifth and Sixth Schedule areas.

Types of Grants

XV FC grants are provided in two parts, namely:

1. Basic (Untied) Grant

• The basic grants are untied and can be used by Rural Local Bodies (RLBs) for location-specific felt needs, under the 29 subjects enshrined in the Eleventh Schedule of the Constitution, except for salaries and other establishment costs.

2. Tied Grant

The tied grants are to be used for the basic services of:

(a) sanitation and maintenance of ODF status, including management and treatment of household waste, and human excreta and faecal sludge management in particular.

(b) supply of drinking water, rainwater harvesting, and water recycling.

Health Grants

The XV FC has also recommended Health Grants for the award period 2021-26.

These grants are to be used to:

• Create diagnostic infrastructure for the primary health care facilities of sub-centres and primary health centres.

• Establish block-level public health units.

• Provide grants for building-less sub-centres, primary health centres, and community health centres.

• Enable conversion of rural primary health centres and sub-centres into Health and Wellness Centres. [Source: INDIA 2024]

Financial Institutions and Year of Establishment

Central Government Schemes (Launched after 2016)

Final Thoughts

The Ministry of Finance plays a central role in managing the country’s money matters – from raising resources for development to regulating how the government spends. Within it, the Department of Economic Affairs is the key agency that shapes India’s economic policies and prepares the Union Budget, which affects every citizen directly or indirectly.

India’s economic growth in 2022-23 showed resilience, with GDP growing at 7.2%, outperforming many global forecasts. While the industrial sector slowed down to 4.4%, the services sector expanded strongly by 9.5%, fully bouncing back to pre-pandemic levels.

Guiding the financial balance between the Union and the states is the Finance Commission, a constitutional body. The 15th Finance Commission, chaired by N.K. Singh introduced grants to strengthen local bodies, sanitation, water supply, and even health infrastructure through diagnostic centres and wellness hubs. The upcoming 16th Finance Commission (2025–2030), led by Arvind Pangariya, will continue this vital task.