The overall approach of Thirteenth Finance Commission (FC-XIII) is to foster ‘inclusive and green growth promoting fiscal federalism’. Inclusive growth is the cornerstone of India’s development project. India’s recent economic growth performance has, indeed, been creditable. However, such growth must take a demonstrable difference to the lives of the poorest and most vulnerable citizens. On this, as reflected in the Millennium Development Goals (MDGs) there is global consensus, of which our nation is a part. India has the potential and the means to secure such a future for its citizens. The stress laid on inclusive growth in the eleventh plan has meant that such growth has been accompanied by a concerted effort, by all levels of government, to invest in the delivery of public services, particularly those which promote progress in achievement of the MDGs. But, to achieve this potential, it is necessary for the resources to be mobilized and deployed in such a manner that the recent high rates of growth are maintained and even increased. Thus, sustainable and inclusive growth are prerequisites for achieving the MDGs.

With this background present paper tries to bring out the role and impact of the Finance Commission in making fiscal consolidation of all the states as well as Union government.