UPSC Prelims 2012 Q33: Indian Economy – Fiscal Policy & Budget
Which of the following is/are among the noticeable features of the recommendations of the
Thirteenth Finance Commission?
1. A design for the Goods and Services Tax, and a compensation package linked to adherence to
the proposed design
2. A design for the creation of lakhs of jobs in the next ten years in consonance with India’s
demographic dividend
3. Devolution of a specified share of central taxes to local bodies as grants
Select the correct answer using the codes given below:
- (a) 1 only
- (b) 2 and 3 only
- (c) 1 and 3 only
- (d) 1, 2 and 3
Answer: (c) 1 and 3 only
Explanation
Thirteenth Finance Commission
Chairman: Vijay Kelkar.
Award period: 2010 to 2015.
| Statement | Verdict | Fact |
|---|---|---|
| 1. A design for the Goods and Services Tax, and a compensation package linked to adherence to the proposed design | Correct | It proposed a 'model GST' and a Rs 50,000 crore compensation grant |
| 2. A design for the creation of lakhs of jobs in the next ten years | Incorrect | Job creation is not a Finance Commission subject |
| 3. Devolution of a specified share of central taxes to local bodies as grants | Correct | Local body grants were tied to a percentage of the divisible pool for the first time |
Other recommendations:
| Subject | Recommendation |
|---|---|
| States' share of central taxes | 32 percent (up from 30.5) |
| Fiscal consolidation | Road map to cut deficits and debt |
The series: 13th: 32 percent; 14th: 42 percent; 15th: 41 percent.
Answer: (c) 1 and 3 only.
Why each option is right or wrong
- (a) Incorrect. Statement 3 is also true: a share of taxes went to local bodies.
- (b) Incorrect. Statement 2 is false; job creation was not its subject.
- (c) CORRECT. It gave a GST design and tied local body grants to the divisible pool.
- (d) Incorrect. Statement 2 is false.
Key point
13th Finance Commission (Vijay Kelkar, 2010-15): States' share 32 percent; model GST with compensation; local body grants as a share of the divisible pool.
Remember
13th Finance Commission: Kelkar, 32 percent, GST design.
Common mistakes
- Adding employment to a Finance Commission's work.
- Confusing the chairmen: Kelkar (13th), Y.V. Reddy (14th), N.K. Singh (15th).
- Forgetting the 32 percent share.
Exam tip
Finance Commissions deal with money between governments, not with jobs.
Sources
- Finance Commission of India — Report of the Thirteenth Finance Commission (2010-15)
- Constitution of India — Article 280