UPSC Indian Economy – Chapter 17: Fiscal Federalism and the Finance Commissions (23 MCQs)
UPSC Indian Economy – Chapter 17: Fiscal Federalism and the Finance Commissions (23 MCQs) – 21 questions, subject: Indian Economy. Every question has the correct answer with a one-line explanation; tap "Show Answer". Free practice for TNPSC, UPSC, SSC, Bank and RRB exams – Shanmugam IAS Academy, Coimbatore.
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The sub-clause of Article 280 that requires the Finance Commission to recommend measures to augment a State's Consolidated Fund to supplement the resources of panchayats was inserted by the:
Correct Answer: B [Constitution (Seventy-third Amendment) Act, 1992]
Explanation:
the 73rd Amendment added Article 280(3)(bb) for panchayats along with Part IX of the Constitution.
The Sixteenth Finance Commission was chaired by:
Correct Answer: C [Arvind Panagariya]
Explanation:
Arvind Panagariya chaired the Sixteenth Finance Commission, constituted on 31 December 2023 for the award period 2026–31.
The share of States in the divisible pool recommended by the Sixteenth Finance Commission is:
Correct Answer: C [41 per cent]
Explanation:
The 16th FC retained the States' share at 41 per cent of the divisible pool, the same as the 15th FC.
Which criterion was introduced for the first time by the Sixteenth Finance Commission?
Correct Answer: D [Contribution to GDP]
Explanation:
Contribution to GDP, with a 10 per cent weight, was added by the 16th FC in place of tax and fiscal effort.
The criterion with the highest weight in the Sixteenth Finance Commission's horizontal formula is:
Correct Answer: C [income distance]
Explanation:
42.5 per cent.
Surcharges on Union taxes are kept wholly by the Union under:
Correct Answer: D [Article 271]
Explanation:
Under Article 271 the whole proceeds of surcharges on Union taxes form part of the Consolidated Fund of India.
Consider the following statements:
1. Most centrally sponsored schemes are funded through grants under Article 282.
2. Statutory grants-in-aid under Article 275 are made on principles recommended by the Finance Commission.
Which of the statements given above is/are correct?
Correct Answer: C [Both 1 and 2]
Explanation:
Article 282 grants fund most centrally sponsored schemes, and Article 275 grants follow Finance Commission principles, so both hold.
The first Finance Commission of India was chaired by:
Correct Answer: D [K. C. Neogy]
Explanation:
1951.
The Fourteenth Finance Commission raised the States' share in the divisible pool from:
Correct Answer: B [32 to 42 per cent]
Explanation:
(b) Correct (Prelims 2015).
State Finance Commissions are provided for under:
Correct Answer: A [Articles 243-I and 243-Y]
Explanation:
Articles 243-I (panchayats) and 243-Y (municipalities) require the Governor to constitute a State Finance Commission every five years.
Assertion (A): A rising share of cesses in the Union's tax revenue reduces the resources available to States.
Reason (R): Cesses are part of the divisible pool shared with States.
Correct Answer: D [A is true, but R is false]
Explanation:
cesses are outside the pool.
The usual Centre–State funding ratio for centrally sponsored schemes in States other than North-Eastern and Himalayan States is:
Correct Answer: A [60:40]
Explanation:
Most centrally sponsored schemes in general-category States are funded 60:40 by the Centre and the State.
SASCI provides States with:
Correct Answer: D [50-year interest-free loans for capital investment]
Explanation:
SASCI gives States 50-year interest-free loans for capital projects, kept outside their 3 per cent fiscal deficit limit.
Arrange the following in chronological order:
1. Sarkaria Commission set up
2. Rajamannar Committee set up
3. Punchhi Commission set up
4. Sixteenth Finance Commission constituted
Select the correct answer:
Correct Answer: C [2-1-3-4]
Explanation:
1969, 1983, 2007, 2023.
The Sixteenth Finance Commission's total grants for local bodies for 2026–31 are:
Correct Answer: B [Rs 7,91,493 crore]
Explanation:
The 16th FC recommended Rs 7,91,493 crore for local bodies: Rs 4,35,236 crore rural and Rs 3,56,257 crore urban.
Consider the following statements about the Sixteenth Finance Commission:
1. It recommended no revenue-deficit grants.
2. It recommended a fiscal deficit limit of 3 per cent of GSDP for States.
3. It recommended raising the States' share to 45 per cent.
Which of the statements given above are correct?
Correct Answer: A [1 and 2 only]
Explanation:
The 16th FC gave no revenue-deficit grants and capped States' fiscal deficit at 3 per cent of GSDP; the share stayed 41 per cent.
The Constitutional Amendment that made all central taxes shareable with States was the:
Correct Answer: B [80th]
Explanation:
2000.
Which committee, appointed by the Government of Tamil Nadu in 1969, recommended a permanent Finance Commission?
Correct Answer: C [Rajamannar Committee]
Explanation:
The Rajamannar Committee was set up by the Tamil Nadu Government in September 1969 to examine Centre–State relations.
Vertical fiscal imbalance in India refers to:
Correct Answer: B [the gap between the revenue-raising powers and spending responsibilities of the Union and the States]
Explanation:
Vertical imbalance is the mismatch between the Union's larger revenue powers and the States' larger spending responsibilities.
Grants-in-aid to States in need of assistance, charged on the Consolidated Fund of India, are provided under:
Correct Answer: A [Article 275]
Explanation:
statutory grants on Finance Commission advice.
Which of the following statements with regard to recommendations of the 15th Finance Commission of India are correct?
I. It has recommended grants of ₹4,800 crores from the year 2022-23 to the year 2025-26 for incentivizing States to enhance educational outcomes.
II. 45% of the net proceeds of Union taxes are to be shared with States.
III. ₹45,000 crores are to be kept as performance-based incentive for all States for carrying out agricultural reforms.
IV. It reintroduced tax effort criteria to reward fiscal performance.
Select the correct answer using the code given below.
Correct Answer: C [I, III and IV]
Explanation:
The 15th FC recommended Rs 4,800 crore education grants and Rs 45,000 crore agriculture incentives and reintroduced tax effort; its share was 41 per cent.
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