Question map
Consider the following : 1. Demographic performance 2. Forest and ecology 3. Governance reforms 4. Stable government 5. Tax and fiscal efforts For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population area and income distance?
Explanation
The correct answer is Option 2 (Only three).
The Fifteenth Finance Commission (XVFC) used six specific criteria for the horizontal distribution of taxes among states for the 2021-26 period. These are:
- Income Distance (45%)
- Area (15%)
- Population (2011 Census) (15%)
- Demographic Performance (12.5%)
- Forest and Ecology (10%)
- Tax and Fiscal Efforts (2.5%)
The question asks for criteria used other than population, area, and income distance. From the provided list, only Demographic performance (1), Forest and ecology (2), and Tax and fiscal efforts (5) were utilized by the Commission. Governance reforms and Stable government are not part of the XVFC’s formula for tax devolution. Therefore, exactly three of the listed criteria were used, making Option 2 the correct choice.
PROVENANCE & STUDY PATTERN
Full viewThis is a classic 'Official Formula' question. The 15th Finance Commission's criteria are a standard table in every economy textbook (Vivek Singh, Singhania). The strategy is simple: for any major index or commission (MPI, FC, NITI Aayog reports), memorize the exact headers and their weights. Do not rely on 'sounds logical' guessing.
This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.
- Statement 1: Was "Demographic performance" included as a criterion by the Fifteenth Finance Commission for horizontal tax devolution, other than population, area and income distance?
- Statement 2: Was "Forest and ecology" included as a criterion by the Fifteenth Finance Commission for horizontal tax devolution, other than population, area and income distance?
- Statement 3: Was "Governance reforms" included as a criterion by the Fifteenth Finance Commission for horizontal tax devolution, other than population, area and income distance?
- Statement 4: Was "Stable government" included as a criterion by the Fifteenth Finance Commission for horizontal tax devolution, other than population, area and income distance?
- Statement 5: Was "Tax and fiscal efforts" included as a criterion by the Fifteenth Finance Commission for horizontal tax devolution, other than population, area and income distance?
- Explicit list of horizontal distribution parameters includes 'Demographic Performance (12.5%)' alongside Income Distance, Population (2011 Census) and State Area.
- Gives a clear weight (12.5%), showing it was a distinct criterion used for tax devolution.
- Specifies 'Demographic Performance (based on total fertility rate)' with an assigned weight (~12%), confirming the metric and inclusion.
- Mentions it as a criterion in the devolution formula context for the 15th Finance Commission.
- Explicit list of horizontal distribution parameters includes 'Forest and Ecology' with a 10% weight.
- List also separately includes Income Distance (45%), Population (2011) (15%) and State Area (15%), so Forest and Ecology is an additional criterion.
- Directly names 'Forest & Ecology' as a criterion and assigns it 10% weight.
- Contrasts the weight with other criteria such as Income Distance (45%), confirming it is part of the formula.
- Explicitly states the Commission retained the income distance criterion and gives its weight, showing income distance was a primary criterion used.
- By documenting the Commission's chosen criteria and weights, this passage supports that income distance (not 'governance reforms') was part of the horizontal devolution formula.
- Specifies the standalone weight assigned to population (15%), confirming population was an explicit criterion.
- Helps establish the set of named criteria used by the Commission (population among them), rather than a 'governance reforms' criterion.
- Specifies the area criterion and its weight (15%), confirming area was explicitly included in the devolution formula.
- Together with the population and income-distance citations, this shows the Commission named these criteria — not a separate 'governance reforms' criterion — in the passages provided.
Gives the explicit list of parameters the XV Finance Commission used for horizontal distribution (Income Distance, Population 2011, Demographic Performance, State Area, Forest & Ecology, Tax and fiscal effort).
A student could compare this list to the asserted criterion — since 'Governance reforms' is not named, one could reasonably suspect it was not included and then verify against the Commission's official report.
Provides criterion-by-criterion weights (e.g., Forest & Ecology 10%, Income Distance 45%, Demographic Performance 12%) confirming the specific criteria and their weights used by the 15th FC.
Using these weighted criteria, a student can note the enumerated criteria leave no slot for a separate 'Governance reforms' factor and thus look up whether any listed item implicitly covered governance.
States that a 'Devolution Formula Used by 15th Finance Commission' exists — indicating the Commission published a defined formula for allocation among states.
Knowing a formal formula was used, a student can seek that formula (or compare its published components) to see if 'Governance reforms' was part of it.
Explains the Finance Commission's remit includes recommending principles that should govern grants and allocations to states.
From this rule, a student can infer the Commission would explicitly list any principle like 'governance reforms' if adopted, so absence from published principles suggests non-inclusion.
Identifies the 15th Finance Commission and its period of work, establishing the relevant Commission whose report and criteria should be consulted.
With the Commission and timeframe known, a student can locate its final recommendations/report to confirm whether 'governance reforms' appears as a horizontal devolution criterion.
- Explicitly states the Fifteenth Finance Commission retained the income distance criterion and gives its weight, showing income distance was a formal criterion.
- Demonstrates income distance is a central, named criterion used in horizontal devolution, with no mention of any 'stable government' criterion in this context.
- Specifies population as a standalone criterion with assigned weight (15%), confirming population was an explicit criterion.
- Shows the Commission followed specified criteria (population) from Terms of Reference, again with no reference to a 'stable government' criterion.
- Describes area as another explicit criterion (with weight 15%) used by the Commission in the devolution formula.
- Together with the other passages, this completes the set (population, area, income distance) of named criteria and contains no indication that 'stable government' was used.
Gives the explicit list of parameters the XV Finance Commission used for horizontal distribution (Income Distance, Population (2011), Demographic Performance, State Area, Forest & Ecology, Tax and fiscal effort).
A student can compare this enumerated list to the statement — if 'stable government' is not on this list, it is unlikely to be an XV FC criterion; verify against the full XV FC report or official summary.
Presents weights and descriptions for criteria (e.g., Forest & Ecology 10%, Income Distance 45%, Demographic Performance 12%), showing which measurable factors received explicit weightage.
One can check whether 'stable government' appears with any assigned weight in the official weight schedule; absence suggests it was not a weighted criterion.
Labels the content as 'Devolution Formula Used by 15th Finance Commission (to allocate funds among States)', indicating the source focuses on the official formula.
Use this as a pointer that the XV FC devolution formula is documented; consult that formula to confirm whether a governance stability metric was included.
Explains the Commission's objective to address horizontal imbalance by assigning weights to things like population and income distance rather than rewarding better governance performance alone.
Use this principle to reason that the XV FC prioritised measures narrowing development gaps (demographic, income, area, ecology) and therefore likely did not include 'stable government' as a primary weighted criterion.
States the Finance Commission's remit includes specifying principles for distribution of taxes among states and grants-in-aid, implying that criteria used should be explicitly declared within its recommendations.
A student can infer that any criterion used (like 'stable government') would be documented in the Commission's recommendations; absence in the listed remit implies checking the published recommendations is the test.
- Provides the explicit list of horizontal distribution parameters used by the XV Finance Commission.
- Includes 'Tax and fiscal effort' with an assigned weight (2.5%) alongside income distance, population, and state area.
- Gives the relative weights, showing tax and fiscal effort was a distinct, quantified criterion.
- [THE VERDICT]: Sitter. Direct lift from the '15th Finance Commission' chapter in standard books (e.g., Vivek Singh pg. 183, Singhania pg. 124).
- [THE CONCEPTUAL TRIGGER]: Fiscal Federalism & Article 280 (Distribution of Net Proceeds).
- [THE HORIZONTAL EXPANSION]: Memorize the 6 exact criteria & weights: 1. Income Distance (45%), 2. Population 2011 (15%), 3. Area (15%), 4. Demographic Performance (12.5%), 5. Forest & Ecology (10%), 6. Tax & Fiscal Effort (2.5%). Note the exclusion of '1971 Population' which was used by the 14th FC.
- [THE STRATEGIC METACOGNITION]: UPSC creates distractors using 'Generic Good Governance' terms. 'Stable Government' and 'Governance Reforms' sound positive, but a tax devolution formula requires hard, quantifiable data (Census, Forest Survey, GDP). If a criterion cannot be easily calculated mathematically for 28 states, it is likely a trap.
The 15th Finance Commission used a multi-criteria formula for allocating central taxes among subnational units that explicitly included demographic performance.
High-yield for fiscal federalism questions: knowing the specific criteria clarifies how redistribution is balanced between need (income distance) and demographic outcomes. Connects to topics on intergovernmental transfers, resource allocation, and policy incentives.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > The XV Finance Commission has recommended the following transfers for 2021-26: > p. 183
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 2.1Grants-in-Aid of Revenue to States: > p. 124
Demographic performance in the allocation formula was operationalised using Total Fertility Rate.
Important for understanding how demographic indicators are converted into fiscal weights; useful for questions on population policy, incentives linked to transfers, and evaluation of performance-based devolution.
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 2.1Grants-in-Aid of Revenue to States: > p. 124
The commission assigned specific percentage weights (e.g., Income Distance ~45%, Demographic Performance ~12–12.5%) to each criterion in horizontal devolution.
Memorising or understanding these weights helps answer direct MCQs and explains the relative emphasis on equity versus performance in redistribution; links to debates on equity, efficiency and demographic policy.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > The XV Finance Commission has recommended the following transfers for 2021-26: > p. 183
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 2.1Grants-in-Aid of Revenue to States: > p. 124
Lists the specific criteria used for horizontal tax devolution including Income Distance, Population (2011), Demographic Performance, State Area, Forest and Ecology, and Tax & fiscal effort.
High-yield for questions on fiscal federalism and centre–state financial relations; helps answer MCQs and mains parts about how transfers are allocated and the principles behind equity in devolution. Links to topics on Finance Commission mandates and distribution of tax proceeds.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > The XV Finance Commission has recommended the following transfers for 2021-26: > p. 183
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 2.1Grants-in-Aid of Revenue to States: > p. 124
Records Forest and Ecology as a distinct component carrying a 10% weight in the XV Commission's devolution formula.
Important for precise factual questions on the composition and weightage in devolution formulas; connects environmental governance with fiscal transfers and policies for ecological compensation.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > The XV Finance Commission has recommended the following transfers for 2021-26: > p. 183
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 2.1Grants-in-Aid of Revenue to States: > p. 124
Uses per capita income distance as a major criterion with a 45% weight to favour less prosperous units.
Core concept in fiscal federalism questions; explains the redistributive rationale behind transfers and links to discussions on equity, regional imbalance and policy priorities in resource allocation.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > The XV Finance Commission has recommended the following transfers for 2021-26: > p. 183
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 2.1Grants-in-Aid of Revenue to States: > p. 124
Lists the specific criteria and weightages used by the 15th Finance Commission for distributing central taxes among states.
High-yield for questions on fiscal federalism and centre–state financial relations; helps recall which factors (beyond simple population/area) influence inter-state transfers and the relative emphasis placed on each. Connects to Articles on grants and the Finance Commission's constitutional role and enables comparison across different Finance Commission formulas.
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > The XV Finance Commission has recommended the following transfers for 2021-26: > p. 183
- Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 5: Indian Tax Structure and Public Finance > 2.1Grants-in-Aid of Revenue to States: > p. 124
- Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 4: Government Budgeting > 1. Finance Commission Grants > p. 182
The 'Vertical Devolution' drop. The 15th FC reduced the states' share from 42% (14th FC) to 41%. Why? To account for the newly formed Union Territories of J&K and Ladakh. This 1% adjustment is the next logical question.
The 'Quantifiability Test'. Horizontal devolution is a mathematical formula used to distribute cash. Ask yourself: 'Can I download an Excel sheet with a precise number for Stable Government for every state?' No, it's subjective. 'Can I get Forest Cover data?' Yes (ISFR report). Subjective criteria are rarely part of mathematical devolution formulas.
Mains GS-2 (Federalism): The introduction of 'Demographic Performance' (12.5%) was a direct response to the 'North-South Divide'. Southern states complained that using 2011 population data punished them for successful family planning. This criterion was the specific policy bridge to balance equity (population needs) with efficiency (population control).