The correct answer is option 2, which is "The Municipalities." The Constitution (74th) Amendment Act is an amendment to the Indian Constitution that was enacted in 1992. This amendment introduced several significant changes regarding urban local bodies, particularly municipalities.
Option 1, composition of the National Development Council, is not mentioned in the Constitution (74th) Amendment Act. The National Development Council is a separate entity that was established earlier to foster cooperation between the central and state governments in the planning and promotion of development.
Option 3, functions of the State Finance Commission, is indeed mentioned in the Constitution (74th) Amendment Act. The Act empowers the State Finance Commission to make recommendations regarding the distribution of financial resources between the state government and the municipalities.
Option 4, functions of the Kaveri Water Authority, is unrelated to the Constitution (74th) Amendment Act. The Kaveri Water Authority is a regulatory body created to resolve disputes related to the use and distribution of water from the Kaveri River between the states of Karnataka and Tamil Nadu.
In summary, the Constitution (74th) Amendment Act mentions the municipalities, not the other options provided.