UPSC Prelims 2015 Question:

With reference to the Fourteenth Finance Commission, which of the following statements is/are correct?

1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent. 
2. It has made recommendations concerning sector-specific grants. 

Select the correct answer using the code given below.

Explanation:

• The Finance Commission (FC) is a Constitutional body formulated under Article 280 of the Indian Constitution. It is constituted every five years by the President of India to review the state of finances of the Union and the States and suggest measures for maintaining a stable and sustainable fiscal environment. It also makes recommendations regarding the devolution of taxes between the Center and the States from the divisible pool which includes all central taxes (excluding surcharges and cess) which the Centre is constitutionally mandated to share with the States.
  
  
• The 14th FC had radically enhanced the share of the states in the central divisible pool from 32 percent to 42 percent which is the biggest ever increase in vertical tax devolution. So, statement 1 is correct.
  
  
• The 14th FC had not made any recommendation concerning sector specific-grants unlike the 13th FC. So, statement 2 is not correct.
  
  

Therefore, option (1) is the correct answer.

Subject: Economics | Indian Economy