The 14th Finance Commission announced in 2013 has already embarked upon its task for formulating recommendations for the transfer of resources to states and local bodies for the period 2015-16 to 2019-20. One of the major challenges that the Commission currently faces relates to the vertical and horizontal resource sharing by the Centre and States. The author argues that in a policy regime which is predetermined by a roadmap of fiscal consolidation, Central transfers with specific conditionalities have increased thus negatively affecting the federal fiscal architecture. The 14th Finance Commission needs to tackle such trends, recommend steps and develop methodology for a reversal of increased centralising tendencies of resource transfers to the states. This would eventually result in better governance within the states.