Consider the following statements regarding Article 281 and the tabling of reports in Parliament:
1. The 14th Finance Commission, chaired by Y.V. Reddy, submitted its report in 2014 and recommended a vertical devolution of 42 percent of the divisible pool, which was subsequently adopted by the Planning Commission for state plan allocations.
2. Article 281 is linked to the administrative functions of the National Development Council, which was established in 1952 to strengthen and mobilize the effort and resources of the nation in support of the Five Year Plans.
3. The Finance Commission is constituted every five years or at such earlier time as the President considers necessary.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 3 is correct as Article 280 mandates the President to constitute a Finance Commission every five years or earlier. Statement 1 is incorrect because the Planning Commission was abolished in 2014 and replaced by NITI Aayog, meaning it did not adopt the 14th Finance Commission's recommendations for state plan allocations. Statement 2 is incorrect because Article 281 pertains specifically to the President causing every recommendation made by the Finance Commission to be laid before each House of Parliament, and it has no constitutional or functional link to the National Development Council.
Consider the following statements regarding Vertical devolution mechanisms and fiscal federalism:
1. The National Development Council, established in 1952, functions as a constitutional body under Article 263 to facilitate coordination between the Union and states regarding the Five-Year Plans.
2. The 12th Finance Commission recommended the inclusion of the 'demographic performance' criterion in the horizontal devolution formula to reward states for achieving lower total fertility rates.
3. The Finance Commission (Miscellaneous Provisions) Act of 1951 defines the qualifications of members, and it allows the Commission to review the financial position of municipal bodies directly under the Seventh Schedule.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the National Development Council is an extra-constitutional and non-statutory body, not established under Article 263. Statement 2 is incorrect as the 'demographic performance' criterion was introduced by the 15th Finance Commission, not the 12th. Statement 3 is incorrect because while the 1951 Act defines qualifications, the Finance Commission's mandate to augment the Consolidated Fund of a state to supplement municipal resources is derived from Articles 243Y and 243Z, not the Seventh Schedule.
Consider the following statements regarding Article 281 and the tabling of reports in Parliament:
1. Under the Finance Commission (Miscellaneous Provisions) Act, 1951, the Commission is composed of a Chairman and four other members appointed by the President.
2. Article 281 of the Indian Constitution directs the President to cause every recommendation made by the Finance Commission to be laid before each House of Parliament.
3. The 15th Finance Commission, chaired by N.K. Singh, submitted its final report covering the period from 2021-22 to 2025-26 to the President in November 2020.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the Finance Commission (Miscellaneous Provisions) Act, 1951, mandates a Chairman and four other members appointed by the President. Statement 2 is correct because Article 281 explicitly mandates the President to lay the Commission's recommendations, along with an explanatory memorandum on the action taken, before each House of Parliament. Statement 3 is correct as the 15th Finance Commission, led by N.K. Singh, submitted its final report for the 2021-22 to 2025-26 period to the President in November 2020.
Consider the following statements regarding Performance-based incentives in fiscal transfers:
1. The 13th Finance Commission recommended a grant-in-aid of 5,000 crore rupees to states for the maintenance of forest cover, marking an early instance of performance-based fiscal transfers.
2. The NITI Aayog's 'State Health Index' utilizes performance-based indicators to determine the allocation of resources under the National Health Mission.
3. Under the 15th Finance Commission recommendations, the performance-based grants for local bodies are contingent upon the notification of floor rates for property taxes by the states.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the 13th Finance Commission introduced 'Forest Cover' as a criterion for horizontal devolution, allocating Rs. 5,000 crore to states based on forest area. Statement 2 is correct because the NITI Aayog's State Health Index serves as a critical tool for competitive federalism, influencing resource allocation and policy focus under the National Health Mission. Statement 3 is correct as the 15th Finance Commission explicitly linked performance-based grants for rural and urban local bodies to the notification of floor rates for property taxes and the improvement of collection efficiency.
Consider the following statements regarding Inter-state tax sharing formulae and demographic performance indicators:
1. Article 280 of the Indian Constitution provides for the constitution of a Finance Commission by the President every five years or at such earlier time as considered necessary.
2. The 13th Finance Commission introduced the demographic performance indicator to incentivize states to improve literacy rates, utilizing the 2001 Census data as the primary benchmark for the calculation.
3. The 15th Finance Commission utilized the 2011 Census data for horizontal devolution, assigning a weight of 12.5 percent to the demographic performance criterion.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 3 is correct. Statement 2 is incorrect.
Statement 1 is correct as Article 280 mandates the President to constitute a Finance Commission every five years or earlier. Statement 3 is correct because the 15th Finance Commission used the 2011 Census for horizontal devolution, assigning a 12.5% weight to demographic performance to reward states for controlling fertility rates. Statement 2 is incorrect because the demographic performance criterion was introduced by the 15th Finance Commission, not the 13th, and it focuses on Total Fertility Rate (TFR) rather than literacy rates.
Consider the following statements regarding Criteria for horizontal devolution of tax proceeds:
1. The weightage for the forest and ecology parameter in the 15th Finance Commission is determined by the dense forest cover area, which replaced the total forest cover metric used by the 14th Finance Commission.
2. The 15th Finance Commission introduced the demographic performance criterion using the 1971 Census data as the base year to ensure consistency with previous commission methodologies.
3. The tax effort criterion, which was part of the 12th Finance Commission's devolution framework, used the ratio of the average per capita tax revenue to the average per capita GSDP of the states.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the 15th Finance Commission uses 'Forest and Ecology' as a criterion based on the share of dense forest of each state in the aggregate dense forest of all states, whereas the 14th Finance Commission did not include forest cover as a standalone criterion. Statement 2 is incorrect because the 15th Finance Commission used the 2011 Census data for the demographic performance criterion to reward states that have achieved replacement level fertility, explicitly moving away from the 1971 Census used by previous commissions. Statement 3 is incorrect because while the tax effort criterion was used by earlier commissions, the 15th Finance Commission discontinued it entirely to simplify the devolution formula.
Consider the following statements regarding Financial relations between the Union and States under Part XII:
1. Article 280 of the Constitution provides for the constitution of a Finance Commission every fifth year or at such earlier time as the President considers necessary.
2. Under Article 275, the Parliament is empowered to provide grants-in-aid to such states as it determines to be in need of assistance, which may vary between different states.
3. The 15th Finance Commission, chaired by N.K. Singh, recommended maintaining the vertical devolution of tax proceeds to states at 41 percent for the 2021-26 period.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as Article 280 mandates the President to constitute a Finance Commission every five years or earlier to recommend the distribution of net tax proceeds between the Union and States. Statement 2 is correct because Article 275 empowers Parliament to provide statutory grants-in-aid to states in need, allowing for differential amounts based on specific fiscal requirements. Statement 3 is correct as the 15th Finance Commission, chaired by N.K. Singh, recommended a 41% vertical devolution (adjusting the 42% recommendation of the 14th FC to account for the reorganization of J&K into Union Territories) for the 2021-26 award period.
Consider the following statements regarding State-specific grants and special category status:
1. The Planning Commission was established by a Presidential Order in 1950, and its functions regarding the allocation of special central assistance were transferred to the Ministry of Finance under Article 282.
2. Special Category Status was historically granted to States based on criteria such as hilly and difficult terrain, low population density, and strategic location along international borders.
3. The 14th Finance Commission introduced the concept of revenue deficit grants for States, which replaced the previous system of plan assistance under the National Development Council.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 1 is incorrect. Statement 3 is incorrect.
Statement 2 is correct as the Gadgil-Mukherjee formula historically determined Special Category Status based on criteria like hilly terrain, low population density, and strategic international borders. Statement 1 is incorrect because the Planning Commission was established by a Government of India resolution, not a Presidential Order, and its functions were transferred to the NITI Aayog, not the Ministry of Finance. Statement 3 is incorrect because while the 14th Finance Commission significantly increased the share of tax devolution and recommended revenue deficit grants, it did not replace the system of plan assistance, which was historically managed by the Planning Commission and the National Development Council.
Consider the following statements regarding Performance-based incentives in fiscal transfers:
1. The 14th Finance Commission established the 'Performance Incentive Fund' to reward states that successfully completed the transition to the Goods and Services Tax regime by the 2017 deadline.
2. The Gadgil Formula, as revised in 1991, incorporates a specific performance-based weightage for states that achieve a higher tax-to-GSDP ratio during the five-year plan period.
3. The 12th Finance Commission introduced the Fiscal Responsibility and Budget Management (FRBM) Act framework, which ties the release of debt consolidation grants to the enactment of state-level fiscal legislation.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the 14th Finance Commission focused on increasing the horizontal devolution share to 42% and did not establish a specific 'Performance Incentive Fund' for GST transition. Statement 2 is incorrect as the Gadgil Formula (revised in 1991) prioritized criteria like population, per capita income, and fiscal management, but did not include a specific performance-based weightage for tax-to-GSDP ratios. Statement 3 is incorrect because while the 12th Finance Commission did link debt relief to fiscal legislation, the FRBM Act was a central legislation enacted in 2003, and the Commission merely incentivized states to adopt their own versions of such acts rather than introducing the FRBM framework itself.
Consider the following statements regarding Vertical devolution mechanisms and fiscal federalism:
1. The 15th Finance Commission, chaired by N.K. Singh, recommended a vertical devolution of 41% of the divisible pool of central taxes to the states for the 2021-26 period.
2. Article 280 of the Constitution provides for the constitution of the Finance Commission by the President at the expiration of every fifth year or at such earlier time as considered necessary.
3. The 1st Finance Commission was established in 1951 under the chairmanship of K.C. Neogy, and it introduced the concept of 'fiscal capacity' as the primary metric for tax sharing.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as the 15th Finance Commission recommended a 41% share for states, adjusted from 42% to account for the creation of the Union Territories of J&K and Ladakh. Statement 2 is correct because Article 280 mandates the President to constitute a Finance Commission every five years or earlier to ensure fiscal federalism. Statement 3 is incorrect because while the 1st Finance Commission was chaired by K.C. Neogy in 1951, it did not introduce 'fiscal capacity' as the primary metric; that concept gained prominence in much later commissions, whereas the first commission focused primarily on population and collection as key criteria.
Consider the following statements regarding NITI Aayog's role in cooperative and competitive federalism:
1. The Atal Innovation Mission, launched under the aegis of NITI Aayog in 2016, functions as a statutory body with the power to allocate research grants directly to state universities.
2. The Vice-Chairperson of NITI Aayog is appointed by the President of India on the recommendation of the Union Finance Minister to ensure fiscal coordination between the Centre and States.
3. The National Development Council, which was reconstituted in 2015 alongside the formation of NITI Aayog, continues to provide the final approval for the Five-Year Plans.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
All three statements are incorrect: The Atal Innovation Mission is an initiative, not a statutory body, and lacks the authority to allocate grants directly to state universities. The Vice-Chairperson of NITI Aayog is appointed by the Prime Minister, not the President, and the position does not require a recommendation from the Finance Minister. Finally, the National Development Council (NDC) was not reconstituted; it became defunct following the replacement of the Planning Commission with NITI Aayog, which does not approve Five-Year Plans as the planning process itself was discontinued.
Consider the following statements regarding Distinction between Finance Commission and NITI Aayog:
1. The 15th Finance Commission, chaired by N.K. Singh, recommended a 41% share for states in the divisible pool of central taxes.
2. Unlike the Finance Commission, NITI Aayog does not possess the power to allocate funds to states or ministries, acting instead as a think tank for policy formulation.
3. Members of the Finance Commission are selected by the President in consultation with the Chief Justice of India, following the procedure established by the NITI Aayog Act of 2015.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as the 15th Finance Commission recommended a 41% share for states, accounting for the adjustment of Jammu and Kashmir into a Union Territory. Statement 2 is correct because the Finance Commission is a constitutional body (Article 280) that recommends tax devolution, whereas NITI Aayog serves as an advisory think tank without financial allocation powers. Statement 3 is incorrect because the members of the Finance Commission are appointed directly by the President under the Finance Commission (Miscellaneous Provisions) Act, 1951, not by the NITI Aayog Act, and without consultation with the Chief Justice of India.
Consider the following statements regarding Evolution of the Planning Commission to NITI Aayog:
1. The National Development Council (NDC), which was presided over by the Prime Minister, was established in August 1952 to strengthen and mobilize the effort and resources of the nation in support of the Five Year Plans.
2. The Planning Commission was tasked with the formulation of Five Year Plans, the first of which was launched in 1951, focusing primarily on the development of the agricultural sector.
3. The NITI Aayog's composition includes a Vice-Chairperson appointed by the Prime Minister and a maximum of five full-time members, alongside ex-officio members from the Union Council of Ministers.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the NDC was established in August 1952 to ensure cooperation between the Centre and States in plan formulation. Statement 2 is correct because the First Five Year Plan (1951-1956) was based on the Harrod-Domar model and prioritized agricultural development to address post-partition food shortages. Statement 3 is correct as the NITI Aayog structure, notified in 2015, mandates a Vice-Chairperson, a maximum of five full-time members, and ex-officio members from the Union Council of Ministers to facilitate cooperative federalism.
Consider the following statements regarding Fiscal Responsibility and Budget Management (FRBM) Act integration:
1. The FRBM Act was amended in 2012 to introduce the concept of effective revenue deficit, which excludes grants for the creation of capital assets from the revenue deficit calculation.
2. The 14th Finance Commission recommended the establishment of an independent Fiscal Council to monitor compliance with the FRBM targets, and the government operationalized this body in 2015.
3. The 15th Finance Commission report suggested a revised fiscal consolidation path for the Union government, targeting a fiscal deficit of 4 percent by 2025-26.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 1 is incorrect because the concept of 'effective revenue deficit' was introduced by the 2011 amendment to the FRBM Act, not 2012. Statement 2 is incorrect because, while the 14th Finance Commission recommended an independent Fiscal Council, the government has not yet established such a body. Statement 3 is correct as the 15th Finance Commission recommended a fiscal consolidation path for the Union government to reach a fiscal deficit of 4 percent or lower by the financial year 2025-26.
Consider the following statements regarding Criteria for horizontal devolution of tax proceeds:
1. The 15th Finance Commission assigned a 12.5% weightage to the demographic performance criterion to reward states that have made progress in controlling fertility rates.
2. Article 280 of the Constitution provides for the establishment of the Finance Commission every five years, and the horizontal devolution formula is determined by the Planning Commission before its dissolution.
3. The 13th Finance Commission utilized the area of a state as a parameter for horizontal devolution, assigning it a weight of 15% to account for the higher per-capita cost of providing administrative services in larger states.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is correct as the 15th Finance Commission assigned a 12.5% weightage to demographic performance to incentivize states for fertility control. Statement 2 is incorrect because the Finance Commission, not the defunct Planning Commission, is constitutionally mandated to determine the horizontal devolution formula under Article 280. Statement 3 is incorrect because The 13th Finance Commission included 'area' as a parameter for horizontal devolution, assigning it a weight of 10%.
Consider the following statements regarding Revenue deficit grants under Article 275:
1. The Sarkaria Commission report of 1988 recommended the inclusion of local body performance grants within the framework of Article 275 to ensure fiscal federalism.
2. The 14th Finance Commission increased the horizontal devolution of taxes to 42 percent and introduced the concept of special category status grants under Article 275.
3. The Gadgil Formula, originally adopted by the National Development Council in 1969, serves as the primary mechanism for distributing Article 275 revenue deficit grants among the states.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because local body grants are governed by Article 280(3)(c) based on Finance Commission recommendations, not Article 275. Statement 2 is incorrect as the 14th Finance Commission increased horizontal devolution to 42% but did not introduce special category status grants; such status was historically determined by the National Development Council. Statement 3 is incorrect because the Gadgil Formula was used for distributing Central Assistance for State Plans, whereas Article 275 grants are provided as 'grants-in-aid' specifically recommended by the Finance Commission to cover post-devolution revenue deficits.
Consider the following statements regarding Finance Commission's role in GST compensation mechanisms:
1. The 15th Finance Commission report incorporates the GST compensation cess collections into the divisible pool of taxes, effectively treating the cess as a component of the net proceeds shared with states under Article 270.
2. The GST Compensation Fund, created under the 2017 Act, is audited by the Finance Commission every three years to ensure that the revenue shortfall calculations align with the horizontal devolution formula.
3. The 15th Finance Commission, chaired by N.K. Singh, submitted its final report covering the period from 2021-22 to 2025-26, which includes recommendations on fiscal consolidation.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 3 is correct as the 15th Finance Commission, chaired by N.K. Singh, submitted its final report for the 2021-26 period, emphasizing fiscal consolidation paths for the Union and States. Statement 1 is incorrect because GST compensation cess is a dedicated levy meant to bridge revenue shortfalls for states and is not part of the divisible pool of taxes under Article 270. Statement 2 is incorrect because the Finance Commission has no mandate to audit the GST Compensation Fund; such audits are the responsibility of the Comptroller and Auditor General (CAG) of India.
Consider the following statements regarding Distinction between Finance Commission and NITI Aayog:
1. The Finance Commission is constituted by the President of India under Article 280 of the Constitution to address the vertical and horizontal distribution of tax revenues.
2. NITI Aayog was established in 2015 through a Cabinet Resolution, replacing the Planning Commission which had functioned since 1950.
3. The Finance Commission is empowered by Article 280 to oversee the implementation of the Five-Year Plans, which were originally formulated by the Planning Commission in 1951.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as Article 280 mandates the President to constitute the Finance Commission every five years to recommend the distribution of net tax proceeds between the Centre and States. Statement 2 is correct because NITI Aayog was established on January 1, 2015, via a Cabinet Resolution to replace the Planning Commission. Statement 3 is incorrect because the Finance Commission has no role in overseeing Five-Year Plans; its mandate is strictly limited to fiscal federalism and revenue sharing, whereas the Planning Commission (now defunct) was responsible for plan formulation.
Consider the following statements regarding National Development Council (NDC) historical functions:
1. The Administrative Reforms Commission in its 1966 report suggested that the National Development Council should be converted into a statutory body with the power to veto state-level budgetary allocations.
2. The National Development Council included the Finance Ministers of all Union Territories as permanent members, reflecting the body's role in fiscal federalism during the 1960s.
3. The National Development Council was responsible for the final approval of the Union Budget before its presentation in Parliament, a function it exercised from 1952 until the mid-1970s.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
All statements are incorrect because the NDC was an extra-constitutional, non-statutory body established in 1952, not a statutory one with veto powers as suggested in Statement 1. Statement 2 is false as the NDC comprised the Prime Minister, Union Cabinet Ministers, and Chief Ministers of states, but did not include Finance Ministers of Union Territories as permanent members. Statement 3 is incorrect because the NDC's mandate was limited to approving the Five-Year Plans and reviewing national development policy, whereas the Union Budget is a constitutional prerogative of the Union Cabinet and Parliament.
Consider the following statements regarding Composition, qualifications, and disqualifications of members:
1. The first Finance Commission was constituted in 1951 under the chairmanship of K.C. Neogy to address the distribution of net proceeds of taxes between the Union and the States.
2. The 15th Finance Commission, chaired by N.K. Singh, submitted its final report for the period 2021-26 to the President of India in November 2020.
3. The qualifications for members of the Finance Commission include the requirement that a person has special knowledge of finance and accounts of the Government.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the first Finance Commission was established in 1951 under K.C. Neogy to recommend tax revenue distribution. Statement 2 is correct because the 15th Finance Commission, chaired by N.K. Singh, submitted its final report for the 2021-26 period to the President in November 2020. Statement 3 is correct as the Finance Commission (Miscellaneous Provisions) Act, 1951, mandates that members must possess special knowledge in finance, accounts, or economics, along with experience in public affairs or administration.
Consider the following statements regarding Advisory vs. binding nature of Finance Commission recommendations:
1. The Finance Commission is empowered under Article 280(3)(c) to monitor the implementation of the National Development Council's five-year plans and adjust state allocations based on plan performance.
2. The recommendations made by the Finance Commission are advisory in nature and do not confer a legal right upon states to receive the grants-in-aid recommended by the Commission.
3. Article 280 of the Constitution provides for the constitution of a Finance Commission by the President every fifth year or at such earlier time as the President considers necessary.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 3 is correct. Statement 1 is incorrect.
Statement 1 is incorrect because the Finance Commission has no mandate to monitor the National Development Council or five-year plans; its primary role is to suggest the distribution of tax proceeds between the Union and States under Article 280. Statement 2 is correct as the Supreme Court has clarified that the Commission's recommendations are advisory and do not create a justiciable legal right for states to demand specific grants. Statement 3 is correct because Article 280 mandates the President to constitute a Finance Commission every five years or earlier, as deemed necessary, to ensure fiscal federalism.
Consider the following statements regarding Constitutional mandate and Article 280 provisions:
1. The 15th Finance Commission, chaired by N.K. Singh, recommended maintaining the vertical devolution of tax proceeds from the Union to the States at 41 percent.
2. Article 280 of the Constitution provides for the constitution of a Finance Commission by the President at the expiration of every fifth year or at such earlier time as the President considers necessary.
3. The Planning Commission was established by a Cabinet Resolution in March 1950, and its first Deputy Chairman, Gulzarilal Nanda, was concurrently appointed as the ex-officio Chairman of the National Development Council.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as the 15th Finance Commission recommended a 41% share for states, adjusting the 42% share of the 14th FC to account for the creation of J&K and Ladakh as Union Territories. Statement 2 is correct as Article 280 mandates the President to constitute a Finance Commission every five years or earlier if deemed necessary. Statement 3 is incorrect because while the Planning Commission was established by a 1950 Cabinet Resolution, the Prime Minister serves as the ex-officio Chairman of the National Development Council, not the Deputy Chairman of the Planning Commission.
Consider the following statements regarding Revenue deficit grants under Article 275:
1. The 10th Finance Commission recommended the creation of a State Disaster Response Fund, which operates as a sub-component of the grants-in-aid provided under Article 275.
2. The First Finance Commission, chaired by K.C. Neogy, established the initial principles for determining the quantum of grants-in-aid under Article 275.
3. The grants under Article 275 are charged upon the Consolidated Fund of India rather than being subject to the annual vote of the Parliament.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 3 is correct. Statement 1 is incorrect.
Statement 1 is incorrect because the State Disaster Response Fund (SDRF) was constituted under the Disaster Management Act, 2005, based on the recommendations of the 13th Finance Commission, not the 10th. Statement 2 is correct as the First Finance Commission (1952), chaired by K.C. Neogy, formulated the foundational principles for grants-in-aid, emphasizing fiscal need and budgetary requirements. Statement 3 is correct because Article 275 grants are explicitly classified as 'charged' expenditure under Article 112(3)(c) of the Constitution, meaning they are not subject to the annual vote of Parliament.
Consider the following statements regarding Criteria for horizontal devolution of tax proceeds:
1. The 14th Finance Commission introduced the forest and ecology criterion with a 10% weightage, calculated based on the absolute forest cover reported in the 2011 State of Forest Report.
2. The Gadgil-Mukherjee formula, which governed the distribution of Central Assistance to states, utilized a weight of 25% for fiscal management to incentivize revenue mobilization.
3. The 15th Finance Commission retained the income distance criterion as the primary parameter, assigning it a weight of 50% to ensure parity with the 14th Finance Commission's recommendations.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the 14th Finance Commission did not include forest cover; it was the 15th Finance Commission that introduced 'Forest and Ecology' with a 10% weightage. Statement 2 is incorrect because the Gadgil-Mukherjee formula assigned a weight of only 20% to fiscal management, not 25%. Statement 3 is incorrect because the 15th Finance Commission reduced the weight of the income distance criterion to 45% (down from the 50% used by the 14th Finance Commission) to accommodate other parameters.
Consider the following statements regarding Role of Finance Commission in local body grants:
1. The 12th Finance Commission recommended that local body grants be calculated based on the 2001 Census data, and these funds were channeled through the District Planning Committees established under Article 243-ZD.
2. The 11th Finance Commission introduced the concept of performance-based grants for local bodies, and these specific fiscal incentives were first disbursed during the 2001-2002 financial year.
3. The State Finance Commission is empowered under Article 243-Y to determine the distribution of taxes between the State and the Municipalities, and its reports are submitted directly to the Union Finance Ministry for final approval.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the 12th Finance Commission used the 1971 Census data for population criteria to avoid penalizing states that controlled population growth. Statement 2 is incorrect as the 11th Finance Commission was the first to recommend grants for local bodies, but the performance-based grant system was formally introduced and institutionalized by the 13th Finance Commission. Statement 3 is incorrect because, under Article 243-Y, the State Finance Commission submits its report to the Governor of the State, who then lays it before the State Legislature, not the Union Finance Ministry.
Consider the following statements regarding State-specific grants and special category status:
1. The 15th Finance Commission, chaired by N.K. Singh, recommended a vertical devolution of 41% of the divisible pool of taxes to the States for the 2021-26 period.
2. Article 275 of the Constitution provides for grants-in-aid to such States as Parliament may determine to be in need of assistance, and different sums may be fixed for different States.
3. The Gadgil Formula, modified in 1991, served as the primary mechanism for the distribution of Central assistance to States during the tenure of the Planning Commission.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the 15th Finance Commission (2021-26) recommended a 41% share for states, adjusting the 42% share of the 14th FC to account for the reorganization of J&K into two Union Territories. Statement 2 is correct because Article 275 empowers Parliament to provide grants-in-aid to states in need, which are distinct from the discretionary grants under Article 282. Statement 3 is correct as the Gadgil Formula, originally formulated in 1969 and modified in 1991, was the standard criterion used by the erstwhile Planning Commission to allocate Central Plan assistance to states.
Consider the following statements regarding Inter-state tax sharing formulae and demographic performance indicators:
1. The demographic performance criterion in the 15th Finance Commission formula rewards states for achieving lower fertility rates, measured by the Total Fertility Rate (TFR) based on 2011 Census data.
2. The Gadgil Formula, which governed the allocation of Central assistance to state plans until 2014, assigned a 10 percent weight to fiscal management and a 20 percent weight to the 1971 population data.
3. The 14th Finance Commission increased the vertical devolution of the divisible pool of taxes to states from 32 percent to 42 percent.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 3 is correct. Statement 2 is incorrect.
Statement 1 is correct as the 15th Finance Commission introduced the 'Demographic Performance' criterion (12.5% weight) using the 2011 Census to reward states for progress in fertility control. Statement 3 is correct because the 14th Finance Commission significantly enhanced fiscal federalism by raising the vertical devolution from 32% to 42%. Statement 2 is incorrect because while the Gadgil Formula did use the 1971 population data (20% weight), it assigned 10% weight to 'fiscal management' and 'tax effort' combined, but specifically, the weight for population was 60%, not 20%.
Consider the following statements regarding State-specific grants and special category status:
1. The Sarkaria Commission, appointed in 1983, suggested the establishment of an Inter-State Council, which subsequently assumed the role of final arbiter for the distribution of special category grants.
2. The 10th Finance Commission recommended the creation of a consolidated fund for local bodies, and this provision was incorporated into the Constitution through the 73rd and 74th Amendment Acts.
3. The Multi-sectoral Development Programme, launched in 2008, operates under the administrative control of the NITI Aayog to provide targeted grants to districts with high minority populations.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the Inter-State Council, established under Article 263, is a recommendatory body for coordination, not an arbiter for grant distribution, which remains the domain of the Finance Commission and the Union Government. Statement 2 is incorrect as the 73rd and 74th Amendment Acts were enacted in 1992, predating the 10th Finance Commission (1995-2000), and the constitutional mandate for State Finance Commissions was already established by these amendments. Statement 3 is incorrect because the Multi-sectoral Development Programme (MsDP) is administered by the Ministry of Minority Affairs, not the NITI Aayog.
Consider the following statements regarding Finance Commission's role in GST compensation mechanisms:
1. Article 280 of the Constitution provides for the constitution of the Finance Commission, which periodically reviews the distribution of net proceeds of taxes between the Union and the States.
2. The Finance Commission is empowered by the Union Budget Act of 1951 to determine the specific GST compensation cess rates, which are then ratified by the President of India on an annual basis.
3. The 101st Constitutional Amendment Act introduced the GST Council as a constitutional body under Article 279A, which functions as a permanent advisory wing of the Finance Commission for tax rate adjustments.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is correct as Article 280 mandates the Finance Commission to recommend the distribution of net tax proceeds between the Union and States. Statement 2 is incorrect because GST compensation cess rates are determined by the GST Council under the GST (Compensation to States) Act, 2017, not the Finance Commission or a 1951 Act. Statement 3 is incorrect because the GST Council, established under Article 279A, is an independent constitutional body and does not function as an advisory wing of the Finance Commission.
Consider the following statements regarding Vertical devolution mechanisms and fiscal federalism:
1. The 14th Finance Commission increased the horizontal devolution weightage of the forest cover criterion to 7.5% to incentivize states for maintaining ecological balance.
2. The Gadgil Formula, as modified in 1991, served as the primary mechanism for the distribution of central plan assistance to states before the transition to the NITI Aayog framework.
3. The Planning Commission was replaced by the NITI Aayog in 2015, and the new body retains the power to allocate discretionary grants to states under Article 282 of the Constitution.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as the 14th Finance Commission introduced 'Forest Cover' as a criterion for horizontal devolution with a 7.5% weightage. Statement 2 is correct because the Gadgil Formula (modified in 1991) was the basis for allocating Central Assistance for State Plans prior to the establishment of NITI Aayog. Statement 3 is incorrect because NITI Aayog is a think-tank and does not possess the power to allocate discretionary grants; such financial powers were transferred to the Ministry of Finance, while Article 282 grants are handled by the Union Government.
Consider the following statements regarding Distinction between Finance Commission and NITI Aayog:
1. The 14th Finance Commission introduced the concept of competitive federalism, a framework that NITI Aayog adopted to rank states based on their performance in the Sustainable Development Goals index.
2. NITI Aayog functions under the administrative control of the Ministry of Finance, which provides the budgetary grants for the implementation of its state-specific development schemes.
3. The Chairman of the Finance Commission is appointed by the Prime Minister for a term of five years, coinciding with the tenure of the Governing Council of NITI Aayog.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because competitive federalism is a core philosophy of NITI Aayog, not an introduction by the 14th Finance Commission. Statement 2 is false as NITI Aayog functions under the Ministry of Planning (or directly under the Prime Minister's Office), not the Ministry of Finance. Statement 3 is incorrect because the Finance Commission Chairman is appointed by the President of India under Article 280, and their tenure is not linked to the Governing Council of NITI Aayog.
Consider the following statements regarding NITI Aayog's State Reform Indices and monitoring frameworks:
1. The NITI Aayog launched the Sustainable Development Goals (SDG) India Index in 2018 to monitor the progress of States and Union Territories in achieving the 2030 Agenda.
2. The State Energy and Climate Index (SECI) evaluates performance across six parameters, including the deployment of renewable energy capacity and the successful implementation of the UDAY scheme as of the 2019 fiscal year.
3. The NITI Aayog introduced the Ease of Doing Business Index in 2015 to replace the Planning Commission's earlier assessment methodology, which relied on the World Bank's annual sub-national rankings.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is correct as NITI Aayog launched the SDG India Index in 2018 to track the progress of States and UTs towards the 2030 Agenda. Statement 2 is incorrect because the State Energy and Climate Index (SECI) evaluates performance across six parameters, but it does not include the UDAY scheme as a specific evaluation metric. Statement 3 is incorrect because the 'Ease of Doing Business' rankings were primarily released by the Department for Promotion of Industry and Internal Trade (DPIIT) in collaboration with the World Bank, not as a NITI Aayog index replacing a Planning Commission methodology.
Consider the following statements regarding Recommendations on disaster management funding:
1. The 15th Finance Commission recommended the constitution of Mitigation Funds at both the National and State levels under the Disaster Management Act, 2005.
2. The 13th Finance Commission introduced the concept of the State Disaster Mitigation Fund (SDMF) as a separate accounting head, which was subsequently merged with the State Disaster Response Fund in 2015.
3. The Disaster Management Act of 2005 establishes the National Disaster Mitigation Fund as a statutory body under the Ministry of Finance, functioning independently of the Finance Commission's budgetary allocations.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is correct because the 15th Finance Commission recommended the creation of National and State Disaster Mitigation Funds (NDMF and SDMF) for the first time, which were subsequently operationalized by the MHA. Statement 2 is incorrect because the 13th Finance Commission did not introduce the SDMF; it was a 15th Finance Commission initiative, and these funds are not merged with the State Disaster Response Fund (SDRF). Statement 3 is incorrect because the Disaster Management Act, 2005, does not establish the NDMF as a statutory body under the Ministry of Finance; rather, the fund was constituted by the Central Government based on the 15th Finance Commission's recommendations, and it functions under the Ministry of Home Affairs.
Consider the following statements regarding NITI Aayog's State Reform Indices and monitoring frameworks:
1. The State Health Index, published by NITI Aayog in collaboration with the Ministry of Health and Family Welfare, utilizes a weighted composite score based on 24 indicators across three domains.
2. The School Education Quality Index (SEQI) is structured into two broad categories: Outcomes and Governance Processes, which are further divided into 34 indicators.
3. The India Innovation Index, released by NITI Aayog and the Institute for Competitiveness, uses a framework based on the Global Innovation Index to assess the innovation landscape of Indian states.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
All three statements are correct: the State Health Index evaluates performance through 24 indicators across health outcomes, governance, and processes; the School Education Quality Index (SEQI) assesses states based on 34 indicators categorized into Outcomes and Governance Processes Aiding Outcomes; and the India Innovation Index is developed by NITI Aayog in partnership with the Institute for Competitiveness, adopting a methodology derived from the Global Innovation Index to rank states based on innovation enablers and performance.
Consider the following statements regarding Recommendations on disaster management funding:
1. The Ministry of Home Affairs manages the State Disaster Response Fund (SDRF) directly, and the 15th Finance Commission's recommendations allow the Ministry to reallocate unspent balances across different states.
2. The 14th Finance Commission proposed that the National Disaster Response Fund be funded through a specific cess on corporate income tax, which was implemented via the Finance Act of 2016.
3. The 12th Finance Commission suggested that the Calamity Relief Fund be replaced by a National Disaster Response Fund, and this transition occurred during the 2009-2010 fiscal year.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the SDRF is managed by state governments, and the 15th Finance Commission did not grant the Ministry of Home Affairs authority to reallocate unspent balances between states. Statement 2 is incorrect as the NDRF is funded through budgetary allocations from the Consolidated Fund of India, not via a specific cess on corporate income tax. Statement 3 is incorrect because the transition from the Calamity Relief Fund to the National Disaster Response Fund was mandated by the Disaster Management Act, 2005, not by a recommendation of the 12th Finance Commission.
Consider the following statements regarding Recommendations on disaster management funding:
1. The 14th Finance Commission increased the States' share in the net proceeds of the divisible pool of central taxes to 42 percent, impacting the fiscal space available for state-level disaster response.
2. Under the 15th Finance Commission's award period (2021-26), the National Disaster Response Fund (NDRF) and State Disaster Response Funds (SDRF) were restructured to include a dedicated window for disaster mitigation.
3. The Planning Commission, prior to its dissolution in 2014, held the authority to approve the annual disaster management plans of states, which the 15th Finance Commission has now transferred to the NITI Aayog.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as the 14th Finance Commission significantly increased the States' share in the divisible pool from 32% to 42% to enhance fiscal autonomy. Statement 2 is correct because the 15th Finance Commission introduced a paradigm shift by creating a 'Mitigation Fund' at both National and State levels, moving beyond mere response and recovery. Statement 3 is incorrect because the Planning Commission never held the authority to approve disaster management plans; such authority rests with the National Disaster Management Authority (NDMA) and State Disaster Management Authorities (SDMAs) under the Disaster Management Act, 2005, and NITI Aayog has no such statutory mandate.
Consider the following statements regarding NITI Aayog's role in cooperative and competitive federalism:
1. The State Support Mission, initiated in 2017, provides for the creation of State Institution for Transformation in every district to decentralize the planning process.
2. The Governing Council of NITI Aayog, chaired by the Prime Minister, includes all Chief Ministers of States and Lieutenant Governors of Union Territories as its members.
3. The NITI Aayog's Export Preparedness Index, first released in 2020, uses data provided by the Ministry of Commerce to rank states based on their compliance with international trade treaties.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 1 is incorrect. Statement 3 is incorrect.
Statement 2 is correct as the Governing Council, chaired by the Prime Minister, serves as the primary interface between the Centre and States, including all Chief Ministers and LGs. Statement 1 is incorrect because the State Support Mission aims to establish State Institutions for Transformation (SITs) at the state level, not the district level, to provide technical support to state governments. Statement 3 is incorrect because the Export Preparedness Index ranks states based on their export ecosystem and performance across pillars like policy, business ecosystem, and export infrastructure, rather than compliance with international trade treaties.
Consider the following statements regarding Performance-based incentives in fiscal transfers:
1. Article 280 of the Constitution provides for the constitution of a Finance Commission every five years or at such earlier time as the President considers necessary.
2. The 15th Finance Commission introduced a performance-based incentive system linked to the implementation of agricultural reforms and the power sector.
3. The 14th Finance Commission increased the vertical devolution of net tax proceeds to states from 32% to 42% of the divisible pool.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as Article 280 mandates the President to constitute a Finance Commission every five years or earlier. Statement 2 is correct because the 15th Finance Commission (2021-26) explicitly introduced performance-based grants linked to specific reforms, including agricultural policy and power sector efficiency. Statement 3 is correct as the 14th Finance Commission significantly enhanced the vertical devolution of the divisible pool from 32% to 42% to strengthen fiscal federalism.
Consider the following statements regarding Financial relations between the Union and States under Part XII:
1. The Consolidated Fund of India includes all revenues received by the Government of India, all loans raised by the Government by the issue of treasury bills, and all moneys received in repayment of loans.
2. The 14th Finance Commission introduced the concept of performance-based grants for local bodies, linking the release of funds to the submission of audited accounts and the notification of property tax floor rates by the state governments.
3. The Contingency Fund of India is placed at the disposal of the Parliament, and advances are made out of this fund for the purposes of meeting unforeseen expenditure pending authorization by the Finance Commission.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is correct as per Article 266, which defines the Consolidated Fund of India to include all revenues, loans raised, and loan repayments. Statement 2 is incorrect because the 14th Finance Commission significantly increased the devolution of tax revenue to states but did not introduce performance-based grants; such conditional grants were a feature of the 13th Finance Commission. Statement 3 is incorrect because the Contingency Fund of India is placed at the disposal of the President, not the Parliament, and is used for unforeseen expenditure pending authorization by the Parliament, not the Finance Commission.
Consider the following statements regarding NITI Aayog's role in cooperative and competitive federalism:
1. The Development Monitoring and Evaluation Office, attached to NITI Aayog, holds the authority to withhold central financial assistance to states that fail to meet specific SDG targets.
2. The NITI Aayog was established on January 1, 2015, through a Cabinet Resolution to replace the Planning Commission which had functioned since 1950.
3. The Finance Commission, under Article 280, coordinates with the NITI Aayog to finalize the annual state-wise distribution of the National Small Savings Fund.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 1 is incorrect. Statement 3 is incorrect.
Statement 2 is correct as NITI Aayog was indeed established on January 1, 2015, via a Cabinet Resolution to succeed the Planning Commission. Statement 1 is incorrect because the Development Monitoring and Evaluation Office acts as an advisory and monitoring body without the legal mandate to withhold central financial assistance to states. Statement 3 is incorrect because the Finance Commission is a constitutional body focused on tax devolution, whereas the National Small Savings Fund is managed by the Ministry of Finance, and NITI Aayog has no role in its state-wise distribution.
Consider the following statements regarding Role of Finance Commission in local body grants:
1. The 14th Finance Commission significantly increased the share of local bodies in the divisible pool by recommending a grant-in-aid of Rs. 2,87,436 crore for the period 2015-2020.
2. Under the 15th Finance Commission framework, the grants for local bodies are divided into two categories: basic grants and tied grants, with the latter earmarked for national priorities like sanitation and drinking water.
3. The Union Finance Commission determines the specific inter-se distribution of grants among individual Gram Panchayats, and these allocations are published in the Gazette of India following the President's assent.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as the 14th Finance Commission significantly enhanced local body funding, recommending Rs. 2,87,436 crore for 2015-2020. Statement 2 is correct because the 15th Finance Commission introduced a bifurcated structure, providing basic grants for general needs and tied grants specifically for water supply and sanitation. Statement 3 is incorrect because the Union Finance Commission only determines the criteria for distribution; the actual inter-se allocation among individual Gram Panchayats is determined by the respective State Finance Commissions and state governments, not the Union body.
Consider the following statements regarding Finance Commission's role in GST compensation mechanisms:
1. The Goods and Services Tax (Compensation to States) Act, 2017, established the legal framework for compensating states for revenue losses arising from the implementation of GST for a transition period of five years.
2. The Planning Commission, prior to its dissolution in 2014, was responsible for the final approval of the GST compensation formula, which was subsequently adopted by the Finance Commission in its 14th report.
3. The 14th Finance Commission recommended an increase in the states' share of the divisible pool of central taxes from 32 percent to 42 percent, a move that significantly altered the fiscal space for state-level expenditures.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 3 is correct. Statement 2 is incorrect.
Statement 1 is correct as the GST (Compensation to States) Act, 2017, provided a statutory guarantee to compensate states for revenue loss for five years ending in 2022. Statement 3 is correct because the 14th Finance Commission, headed by Y.V. Reddy, historicially increased the states' share in the net tax proceeds of the Centre from 32% to 42% to boost fiscal federalism. Statement 2 is incorrect because the GST compensation formula was determined by the GST Council, a constitutional body under Article 279A, not the Planning Commission, which had no role in fiscal federalism or GST policy.
Consider the following statements regarding Fiscal Responsibility and Budget Management (FRBM) Act integration:
1. The NK Singh Committee, constituted in 2016, recommended a debt-to-GDP ratio of 60 percent for the general government by the financial year 2023.
2. The FRBM Act was enacted in 2003 to provide a statutory framework for the reduction of fiscal deficit and the elimination of revenue deficit.
3. Under the FRBM Act, the government is permitted to exceed the fiscal deficit targets on grounds of national security, act of war, or collapse of agriculture.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the N.K. Singh Committee (2016) proposed a debt-to-GDP ratio of 60% for the general government by 2023, with 40% for the Centre and 20% for States. Statement 2 is correct because the FRBM Act, 2003, was enacted to ensure fiscal discipline by mandating the elimination of revenue deficit and reduction of fiscal deficit to 3% of GDP. Statement 3 is correct as the Act includes an 'escape clause' allowing the government to deviate from targets due to exceptional circumstances like national security, war, national calamity, or collapse of agriculture, provided it is justified by structural reforms.
Consider the following statements regarding Composition, qualifications, and disqualifications of members:
1. The Planning Commission, established by a 1950 executive resolution, included the Union Finance Minister as an ex-officio member and allowed for the appointment of part-time members based on their tenure in the Rajya Sabha.
2. A person is disqualified from being a member of the Finance Commission if they have been convicted of an offense involving moral turpitude as defined under the 1951 Act.
3. The Finance Commission (Miscellaneous Provisions) Act of 1951 provides that the Chairman of the Commission is selected from among individuals who have served as a Cabinet Secretary, and the term of office for each member is fixed at six years.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 1 is incorrect. Statement 3 is incorrect.
Statement 2 is correct as the Finance Commission (Miscellaneous Provisions) Act, 1951, mandates disqualification for members convicted of an offense involving moral turpitude. Statement 1 is incorrect because the Planning Commission's composition was not linked to Rajya Sabha tenure, and its ex-officio members were primarily the Prime Minister and Finance Minister. Statement 3 is incorrect because the Chairman must be a person having 'experience in public affairs,' not necessarily a Cabinet Secretary, and the term of office is determined by the President, not fixed at six years.
Consider the following statements regarding NITI Aayog's State Reform Indices and monitoring frameworks:
1. The Agricultural Marketing and Farmer Friendly Reforms Index (AMFFRI) tracks the adoption of the Model APMC Act, and it was formally integrated into the Finance Commission's horizontal devolution formula in 2017.
2. The Composite Water Management Index (CWMI) developed by NITI Aayog evaluates performance across nine thematic areas, including groundwater restoration and irrigation management.
3. The Export Preparedness Index (EPI) ranks states based on four pillars: Policy, Business Ecosystem, Export Ecosystem, and Export Performance.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 2 is correct. Statement 3 is correct. Statement 1 is incorrect.
Statement 1 is incorrect because, while the AMFFRI was launched by NITI Aayog to track APMC reforms, it has never been integrated into the Finance Commission's horizontal devolution formula, which relies on constitutional criteria like population, area, and forest cover. Statement 2 is correct as the CWMI assesses states across nine thematic areas, including groundwater, irrigation, and rural drinking water, to promote cooperative federalism in water management. Statement 3 is correct because the Export Preparedness Index (EPI) provides a comprehensive assessment of states' export potential using a framework structured around the four pillars of Policy, Business Ecosystem, Export Ecosystem, and Export Performance.
Consider the following statements regarding Evolution of the Planning Commission to NITI Aayog:
1. The Planning Commission was established in March 1950 through an executive resolution of the Government of India, following the recommendations of the Advisory Planning Board constituted in 1946.
2. The Prime Minister serves as the Chairperson of the NITI Aayog Governing Council, which includes all Chief Ministers of States and Lieutenant Governors of Union Territories.
3. The National Institution for Transforming India (NITI Aayog) was formed on January 1, 2015, replacing the Planning Commission to serve as a think tank for the Government of India.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the Planning Commission was established in March 1950 via an executive resolution based on the 1946 Advisory Planning Board's recommendations. Statement 2 is correct because the NITI Aayog Governing Council, which includes all Chief Ministers and LGs, is chaired by the Prime Minister to foster cooperative federalism. Statement 3 is correct as NITI Aayog was formally constituted on January 1, 2015, as a policy think tank to replace the top-down approach of the Planning Commission.
Consider the following statements regarding Financial relations between the Union and States under Part XII:
1. The Goods and Services Tax Council is chaired by the Union Finance Minister and includes the Union Minister of State in charge of Revenue or Finance as a member, with decisions taken by a simple majority of those present and voting.
2. Article 268 of the Constitution refers to duties levied by the Union but collected and appropriated by the States, including stamp duties on bills of exchange and excise duties on medicinal preparations.
3. The Finance Commission is constituted under Article 263 of the Constitution, which also provides for the establishment of the Inter-State Council to coordinate policy between the Union and the States.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because the GST Council requires a three-fourths majority of the weighted votes of members present and voting, not a simple majority. Statement 2 is incorrect because Article 268 covers duties levied by the Union but collected and appropriated by the States, yet excise duties on medicinal preparations are specifically excluded from this list. Statement 3 is incorrect because the Finance Commission is constituted under Article 280, whereas Article 263 deals exclusively with the establishment of the Inter-State Council.
Consider the following statements regarding Constitutional mandate and Article 280 provisions:
1. Article 275 of the Constitution empowers the Finance Commission to recommend grants-in-aid to States, and the 14th Finance Commission introduced the criteria of forest cover as a weightage factor for horizontal distribution.
2. The National Development Council, established in 1952, included the Prime Minister as its head and provided a platform for the Finance Commission to review the implementation of Five-Year Plans.
3. The Finance Commission submits its reports directly to the Union Finance Minister, who presents the recommendations to the Parliament along with an explanatory memorandum on the action taken.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because Article 275 empowers Parliament, not the Finance Commission, to provide grants-in-aid, and the 14th Finance Commission introduced 'forest cover' as a criterion, but the 15th FC continued it. Statement 2 is incorrect because the National Development Council was a non-constitutional body chaired by the PM, but it had no formal mandate to review the Finance Commission's work. Statement 3 is incorrect because, under Article 281, the Finance Commission submits its report to the President, who then causes it to be laid before each House of Parliament.
Consider the following statements regarding Composition, qualifications, and disqualifications of members:
1. The Finance Commission (Miscellaneous Provisions) Act of 1951 specifies that a person shall be qualified for appointment as a member of the Commission if they have been a judge of a High Court or are qualified to be appointed as one.
2. Under the Finance Commission (Miscellaneous Provisions) Act of 1951, a person is disqualified from being a member if they are of unsound mind and stand so declared by a competent court.
3. Article 280 of the Constitution provides that the Finance Commission shall consist of a Chairman and four other members to be appointed by the President.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the Finance Commission (Miscellaneous Provisions) Act, 1951, mandates that a member must be or have been a High Court judge. Statement 2 is correct because the 1951 Act explicitly lists being of unsound mind, as declared by a competent court, as a ground for disqualification. Statement 3 is correct as Article 280 of the Constitution empowers the President to appoint a Chairman and four other members to the Commission.
Consider the following statements regarding Revenue deficit grants under Article 275:
1. Article 275 of the Constitution provides for the payment of grants-in-aid to such States as Parliament may determine to be in need of assistance.
2. The Finance Commission (Miscellaneous Provisions) Act of 1951 outlines the specific criteria for determining revenue deficits, including the exclusion of interest payments on external debt.
3. The 15th Finance Commission recommended Post-Devolution Revenue Deficit Grants to 17 states during the 2021-26 award period.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 3 is correct. Statement 2 is incorrect.
Statement 1 is correct as Article 275 empowers Parliament to provide grants-in-aid to states in need, as determined by the Finance Commission. Statement 3 is correct because the 15th Finance Commission, in its report for 2021-26, recommended Post-Devolution Revenue Deficit Grants (PDRDG) for 17 states to bridge the gap in their revenue accounts. Statement 2 is incorrect because there is no such 'Finance Commission (Miscellaneous Provisions) Act of 1951'; the Finance Commission operates under the Finance Commission (Miscellaneous Provisions) Act, 1951, which does not define specific criteria for revenue deficits, as these are determined by the Commission based on its own methodology and terms of reference.
Consider the following statements regarding Role of Finance Commission in local body grants:
1. The 73rd Constitutional Amendment Act introduced Article 243-I, which directs the Governor of a State to constitute a State Finance Commission every five years to review the financial position of Panchayats.
2. Article 280(3)(c) of the Constitution empowers the Finance Commission to recommend measures to augment the Consolidated Fund of a State to supplement the resources of Panchayats based on the recommendations made by the Finance Commission of the State.
3. The 15th Finance Commission, chaired by N.K. Singh, recommended a total grant of Rs. 4,36,361 crore for rural local bodies for the period 2021-26.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as Article 243-I mandates the Governor to constitute a State Finance Commission every five years to review the financial position of Panchayats. Statement 2 is correct because Article 280(3)(c) empowers the Union Finance Commission to suggest measures to augment the State's Consolidated Fund based on State Finance Commission recommendations to bolster local body resources. Statement 3 is correct as the 15th Finance Commission, under N.K. Singh, allocated Rs. 4,36,361 crore specifically for rural local bodies for the 2021-26 award period. There are no incorrect statements.
Consider the following statements regarding Advisory vs. binding nature of Finance Commission recommendations:
1. The Finance Commission (Miscellaneous Provisions) Act, 1951, defines the qualifications and the manner of selection of the members of the Commission.
2. The report of the Finance Commission, along with an explanatory memorandum as to the action taken on the recommendations, is laid before each House of Parliament under Article 281.
3. The 15th Finance Commission, chaired by N.K. Singh, recommended a vertical devolution of 41% of the divisible pool of taxes to the states for the 2021-26 period.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the 1951 Act provides the legal framework for the composition and qualifications of the Commission members. Statement 2 is correct because Article 281 mandates the President to lay the Commission's recommendations, along with an action-taken report, before both Houses of Parliament. Statement 3 is correct as the 15th Finance Commission recommended a 41% vertical devolution, accounting for the adjustment of 1% for the newly formed Union Territories of Jammu & Kashmir and Ladakh.
Consider the following statements regarding Article 281 and the tabling of reports in Parliament:
1. The First Finance Commission was constituted in 1951 under the chairmanship of K.C. Neogy to address the distribution of net proceeds of taxes between the Union and the States.
2. Article 280(3) of the Constitution outlines the duties of the Finance Commission, including the distribution of the net proceeds of taxes which are to be, or may be, divided between the Union and the States.
3. The Explanatory Memorandum as to the action taken on the recommendations of the Finance Commission is presented to Parliament along with the Commission's report.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as the First Finance Commission was established in 1951 under K.C. Neogy to recommend the distribution of tax proceeds. Statement 2 is correct because Article 280(3) explicitly mandates the Commission to advise on the division of net tax proceeds between the Union and States. Statement 3 is correct as Article 281 requires the President to cause every recommendation made by the Finance Commission, along with an explanatory memorandum on the action taken, to be laid before each House of Parliament.
Consider the following statements regarding Evolution of the Planning Commission to NITI Aayog:
1. The Planning Commission was established by an Act of Parliament in 1950, and it functioned as a constitutional body until the creation of the NITI Aayog in 2015.
2. The NITI Aayog was created through a constitutional amendment in 2015, which replaced the Planning Commission and provided the body with the power to allocate financial resources to state governments.
3. The National Development Council was established in 1952 as a statutory body under Article 263 of the Constitution, providing a platform for inter-state coordination regarding economic planning.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
All three statements are incorrect because the Planning Commission was established by an executive resolution in 1950, not an Act of Parliament, and was never a constitutional body. Similarly, NITI Aayog was created by an executive resolution in 2015, not a constitutional amendment, and it lacks the power to allocate financial resources, a function now handled by the Finance Ministry. Finally, the National Development Council was neither a statutory body nor established under Article 263; it was an extra-constitutional, non-statutory body created in 1952 to strengthen the federal approach to planning.
Consider the following statements regarding National Development Council (NDC) historical functions:
1. The Planning Commission acted as the secretariat for the National Development Council, and its Secretary served as the ex-officio Chairman of the Council's standing committee.
2. The National Development Council underwent a structural change in 1967 when the Sarkaria Commission recommended the inclusion of all district magistrates as non-voting observers to ensure grassroots feedback.
3. The National Development Council held the authority to modify the terms of reference of the Finance Commission, provided such changes were ratified by a two-thirds majority of the state Chief Ministers.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is incorrect. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is incorrect because while the Planning Commission served as the secretariat for the NDC, the Secretary of the Planning Commission served as the Secretary to the NDC, not the Chairman of a standing committee. Statement 2 is incorrect as the Sarkaria Commission (1983-88) never recommended the inclusion of district magistrates in the NDC, nor did such a structural change occur in 1967. Statement 3 is incorrect because the NDC had no constitutional or legal authority to modify the terms of reference of the Finance Commission, which is a constitutional body established under Article 280.
Consider the following statements regarding National Development Council (NDC) historical functions:
1. The first meeting of the National Development Council was chaired by the President of India in November 1952, focusing on the administrative implementation of the First Five Year Plan.
2. The National Development Council was constituted under Article 263 of the Indian Constitution, which provides for the establishment of an Inter-State Council to coordinate policy between the Union and the States.
3. The National Development Council was established in August 1952 through a cabinet resolution to strengthen and mobilize the efforts and resources of the nation in support of the Five Year Plans.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 3 is correct because the NDC was established in August 1952 via a cabinet resolution to serve as the highest policy-making body for Five Year Plans. Statement 1 is incorrect because the Prime Minister of India, not the President, serves as the ex-officio Chairman of the NDC. Statement 2 is incorrect because the NDC was an extra-constitutional and non-statutory body, whereas Article 263 relates to the Inter-State Council, which is distinct from the NDC.
Consider the following statements regarding Fiscal Responsibility and Budget Management (FRBM) Act integration:
1. Section 7 of the FRBM Act restricts the Reserve Bank of India from subscribing to the primary issue of central government securities after April 2006.
2. The Medium Term Fiscal Policy Statement is a mandatory document presented to Parliament along with the Annual Financial Statement under the FRBM framework.
3. The FRBM Act provides for the Medium Term Expenditure Framework Statement, which is laid before both Houses of Parliament during the Winter Session to outline the three-year rolling targets for expenditure.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is incorrect.
Statement 1 is correct as Section 7 of the FRBM Act prohibits the RBI from participating in the primary market for government securities since April 1, 2006, to ensure fiscal discipline. Statement 2 is correct because the FRBM Act mandates the presentation of the Medium Term Fiscal Policy Statement along with the Union Budget to provide a three-year rolling fiscal roadmap. Statement 3 is incorrect because, while the Medium Term Expenditure Framework Statement is a mandatory requirement under the FRBM Act, it is laid before Parliament during the Budget Session, not the Winter Session.
Consider the following statements regarding Inter-state tax sharing formulae and demographic performance indicators:
1. The 15th Finance Commission recommended a tax devolution of 41 percent to the states, adjusting the 14th Finance Commission's share by one percentage point to account for the creation of the Union Territories of Jammu and Kashmir and Ladakh.
2. The 12th Finance Commission incorporated a specific grant for states that maintained a stable population growth rate between the 1991 and 2001 Census periods, allocating 5 percent of the total divisible pool for this purpose.
3. The NITI Aayog replaced the Planning Commission in 2015 and retains the authority to determine the inter-state tax sharing ratio, which is then formally notified by the Union Ministry of Finance.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is incorrect. Statement 3 is incorrect.
Statement 1 is correct because the 15th Finance Commission reduced the vertical devolution from 42% to 41% to accommodate the fiscal requirements of the newly formed Union Territories of Jammu and Kashmir and Ladakh. Statement 2 is incorrect because the 14th Finance Commission was the first to use the 2011 Census data as a criterion for tax devolution, whereas the 12th Finance Commission did not use demographic performance as a specific parameter for the divisible pool. Statement 3 is incorrect because the Finance Commission, a constitutional body under Article 280, holds the sole mandate to recommend the tax-sharing ratio, while NITI Aayog serves only as a policy think tank with no role in fiscal devolution.
Consider the following statements regarding Constitutional mandate and Article 280 provisions:
1. Under Article 280(3)(c), the Finance Commission is tasked with suggesting measures to augment the Consolidated Fund of a State to supplement the resources of Panchayats based on recommendations made by the Finance Commission of the State.
2. The Finance Commission (Miscellaneous Provisions) Act, 1951, specifies the qualifications for appointment as members of the Commission and the manner in which they are selected.
3. The first Finance Commission was constituted in 1951 under the chairmanship of K.C. Neogy and submitted its report in 1952 covering the period from 1952 to 1957.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 1 is correct. Statement 2 is correct. Statement 3 is correct.
Statement 1 is correct as Article 280(3)(c) was inserted by the 73rd Amendment Act to empower the Finance Commission to recommend measures for augmenting state funds to support Panchayats. Statement 2 is correct because the Finance Commission (Miscellaneous Provisions) Act, 1951, provides the statutory framework for the qualifications and selection process of the Commission's members. Statement 3 is correct as the first Finance Commission was indeed established in 1951 under K.C. Neogy, and its recommendations governed the fiscal period from 1952 to 1957.
Consider the following statements regarding Advisory vs. binding nature of Finance Commission recommendations:
1. The 14th Finance Commission introduced the concept of performance-based grants for local bodies, which the Union Cabinet implemented through a direct transfer mechanism bypassing the Consolidated Fund of India.
2. The Planning Commission, established in 1950, held the authority to modify the tax devolution percentages recommended by the Finance Commission during the mid-term appraisal of the annual budgets.
3. The First Finance Commission was constituted in 1951 under the chairmanship of K.C. Neogy to address the financial adjustments between the Centre and the states.
How many of the statements given above are correct?
- Only one
- Only two
- All three
- None
Explanation: Statement 3 is correct. Statement 1 is incorrect. Statement 2 is incorrect.
Statement 3 is correct as the First Finance Commission was indeed constituted in 1951 under K.C. Neogy to address fiscal federalism. Statement 1 is incorrect because Finance Commission grants are routed through the Consolidated Fund of India, and the Union Cabinet cannot bypass this constitutional requirement. Statement 2 is incorrect because the Planning Commission lacked the constitutional authority to modify tax devolution percentages, which are determined by the President based on Finance Commission recommendations.