Indian Economy Textbook Questions – Fiscal Federalism · Finance Commission · Devolution of Taxes · Union–State Relations (Part 2)

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Indian Economy Textbook Questions – Fiscal Federalism · Finance Commission · Devolution of Taxes · Union–State Relations (Part 2) – 18 questions, subject: 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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1.  
What is the Union : State share in the State Disaster Response Fund for general States?

Correct Answer: D [75 : 25]

Explanation:

90 : 10 for North-Eastern and Himalayan States; under both the 15th and 16th Commissions.

2.  
Which Finance Commission recommended funds for setting up Fast Track Courts?

Correct Answer: A [11th]

Explanation:

11th (A.M. Khusro): ₹502.90 crore for 1,734 courts.

3.  
What is Tamil Nadu's share in the States' portion of the divisible pool under the 16th Finance Commission?

Correct Answer: C [4.097%]

Explanation:

4.079% = 15th (2021–26); 4.189% = 2020-21; 5.305% = 12th.

4.  
If the divisible pool is ₹100, about how much goes to Tamil Nadu under the 16th Finance Commission?

Correct Answer: D [₹1.68]

Explanation:

₹100 × 41% = ₹41; ₹41 × 4.097% ≈ ₹1.68. This is not a return of what Tamil Nadu paid.

5.  
Which new criterion for horizontal devolution did the 16th Finance Commission introduce?

Correct Answer: B [Contribution to GDP]

Explanation:

GDP contribution 10%; tax effort dropped; demographic performance was introduced by the 15th.

6.  
Under which Article is the Inter-State Council set up?

Correct Answer: A [Article 263]

Explanation:

Presidential order 28.5.1990; chaired by the Prime Minister. 262 = river water disputes.

7.  
Match the committee with its subject:
a. Nayak Committee1. Unorganised sector
b. Tarapore Committee2. Capital account convertibility
c. Sarkaria Commission3. Credit to small industries
d. Arjun Sengupta Committee4. Union–State relations

Correct Answer: D [3 2 4 1]

Explanation:

Nayak small industry credit; Tarapore capital account; Sarkaria Union–State; Sengupta unorganised sector.

8.  
Assertion (A): The Union and the States levy tax simultaneously on the same supply of goods and services.
Reason (R): The 101st Amendment (2016) gave both governments concurrent power over GST through Article 246A.
கூற்று–காரண வினாக்களுக்கான தேர்வுகள்
(A) கூற்றும் காரணமும் சரி; காரணம் கூற்றுக்குச் சரியான விளக்கம்
(B) கூற்றும் காரணமும் சரி; ஆனால் காரணம் சரியான விளக்கம் அல்ல
(C) கூற்று சரி; காரணம் தவறு
(D) கூற்று தவறு; காரணம் சரி
Options for Assertion–Reason questions
(A) Both A and R are true; R is the correct explanation of A
(B) Both A and R are true; R is not the correct explanation of A
(C) A is true; R is false
(D) A is false; R is true

Correct Answer: A []

Explanation:

CGST + SGST on the same transaction; the basis is Article 246A.

9.  
Assertion (A): After the 80th Amendment, cesses and surcharges form part of the divisible pool.
Reason (R): Article 270(1) excludes cesses and surcharges from sharing.

Correct Answer: D []

Explanation:

The reason is true; that is exactly why the assertion is false.

10.  
Which Article requires a State that owes money to the Union to obtain Union consent for fresh borrowing?

Correct Answer: C [Article 293]

Explanation:

Article 293(3); 292 = Union borrowing; 360 = financial emergency.

11.  
Assertion (A): The Finance Commission is not a permanent body.
Reason (R): Each Commission ends with its report; the President constitutes the next one every five years.

Correct Answer: A []

Explanation:

It is a temporary, quasi-judicial body; the reason explains the assertion.

12.  
Which statements about Finance Commissions are correct?
  1. The 14th Commission recommended 42% of the divisible pool for States.
  2. The 13th Commission was chaired by Vijay L. Kelkar.
  3. The 11th Commission was chaired by C. Rangarajan.

Correct Answer: B [1, 2 only]

Explanation:

The 11th Commission was chaired by A.M. Khusro; Rangarajan chaired the 12th.

13.  
Assertion (A): Arvind Panagariya chaired the 16th Finance Commission.
Reason (R): Arvind Panagariya was the first Vice-Chairman of NITI Aayog.

Correct Answer: B []

Explanation:

Both are true; the NITI Aayog post is not the reason for chairing the Commission.

14.  
Which statements about the 16th Finance Commission recommendations are correct?
  1. Revenue deficit grants were discontinued.
  2. Sector-specific grants were continued.
  3. The urban local body grant has a special infrastructure component.

Correct Answer: A [1, 3 only]

Explanation:

Revenue deficit, sector-specific and State-specific grants were stopped; the urban local body grant has a special infrastructure component.

15.  
Assertion (A): N.K. Singh chaired the 15th Finance Commission.
Reason (R): N.K. Singh is a former Governor of the Reserve Bank of India.

Correct Answer: C []

Explanation:

He chaired the FRBM Review Committee (2016), not RBI Governor. Former RBI Governors: Y.V. Reddy (14th), C. Rangarajan (12th).

16.  
Which statements about the weights of the 16th Finance Commission criteria are correct?
  1. Income distance carries 42.5%.
  2. Population (2011) carries 17.5%.
  3. Area carries 10%.

Correct Answer: B [1, 2, 3]

Explanation:

Income distance 42.5 + population 17.5 + area 10 + forest 10 + demographic performance 10 + GDP contribution 10 = 100.

17.  
Assertion (A): Though Tamil Nadu's percentage share has fallen since the 12th Commission, its devolution in rupees keeps rising.
Reason (R): The divisible pool grows year after year.

Correct Answer: A []

Explanation:

Lower percentage ≠ fewer rupees; 2024-25 ₹51,626 crore ➜ 2026-27 ₹62,531 crore.

18.  
Assertion (A): The State Finance Commission is constituted by the Governor.
Reason (R): The State Finance Commission is constituted under Article 280.

Correct Answer: C []

Explanation:

State Finance Commission = Articles 243-I, 243-Y; Article 280 = Union Finance Commission.

? Full lessons and explanations – Indian Economy PDF textbook (₹299): www.shanmugamiasacademy.in/study-materials/tnpsc-gs-unit-5-indian-economy

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