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Q45 (IAS/2011) Polity & Governance › Constitutional & Statutory Bodies › Finance Commission of India Answer Verified

With reference to the Finance Commission of India, which of the following statements is correct?

Result
Your answer: —  Â·  Correct: D
Explanation

The Finance Commission of India is a constitutional body established under Article 280 to recommend the distribution of net tax proceeds between the Union and the States (vertical devolution) and among the States (horizontal devolution) [5]. It also defines the principles governing grants-in-aid to States from the Consolidated Fund of India and suggests measures to augment State Consolidated Funds for local bodies [4]. Statement 1 is incorrect as the Commission does not manage foreign capital inflows; these are handled by the Ministry of Finance and RBI [1]. Statement 2 is incorrect because the Commission does not distribute finances among Public Sector Undertakings [2]. Statement 3 is incorrect as ensuring transparency in financial administration is primarily the role of the Comptroller and Auditor General (CAG) and the Ministry of Finance, not the core mandate of the Finance Commission [4]. Therefore, none of the provided statements (1), (2), or (3) are correct.

Sources

  1. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 1. Finance Commission Grants > p. 182
  2. [4] https://www.oecd.org/en/publications/addressing-legal-and-regulatory-barriers-to-quality-infrastructure-investment-in-india-indonesia-and-the-philippines_fb81e1be-en/full-report/india_158f795a.html
  3. [5] https://www.indiabudget.gov.in/budget2015-2016/es2014-15/echapvol1-10.pdf
  4. [1] Laxmikanth, M. Indian Polity. 7th ed., McGraw Hill. > Chapter 46: Finance Commission > FUNCTIONS > p. 431
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