Financial distribution between the Union and the State in India is based on the recommendations of the Finance Commission. The Finance Commission is a constitutional body that is appointed by the President of India every five years or at any interval as deemed necessary.
The Finance Commission`s main responsibility is to determine the division of financial resources between the Union (central government) and the States (state governments). This division encompasses the sharing of taxes, grants-in-aid, and other sources of revenue.
The Finance Commission takes into consideration various factors such as the state of the economy, population, area, infrastructure, and other relevant factors while formulating its recommendations. This ensures a fair and equitable distribution of resources and promotes fiscal federalism in the country.
The National Development Council (option 1) is a forum for cooperative federalism and does not directly play a role in financial distribution. The Inter-State Council (option 2) primarily deals with center-state and inter-state relations but does not have the mandate to recommend financial distribution. The Planning Commission (option 3) was replaced by the NITI Aayog in 2015 and was responsible for formulating Five-Year Plans but not for financial distribution.
Therefore, the correct answer is option 4 - The Finance Commission.