UPSC Prelims 2015 Q2: Indian Economy – Fiscal Policy & Budget
With reference to the Fourteenth Finance Commission, which of the following statements
is/are correct?
1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent.
2. It has made recommendations concerning sector - specific grants.
Select the correct answer
using the code given below.
- (a) 1 only
- (b) 2 only
- (c) Both 1 and 2
- (d) Neither 1 nor 2
Answer: (a) 1 only
Explanation
Fourteenth Finance Commission
Chairman: Y.V. Reddy.
Award period: 2015 to 2020.
| Statement | Verdict | Fact |
|---|---|---|
| 1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent | Correct | The largest ever jump in tax devolution |
| 2. It has made recommendations concerning sector-specific grants | Incorrect | It chose not to give sector-specific grants |
Devolution formula:
| Criterion | Weight |
|---|---|
| Income distance | 50 percent |
| Population (1971) | 17.5 percent |
| Demographic change (2011 population) | 10 percent |
| Area | 15 percent |
| Forest cover | 7.5 percent |
It did give grants for local bodies, disaster management and revenue deficit.
Answer: (a) 1 only.
Why each option is right or wrong
- (a) CORRECT. The States' share rose from 32 percent to 42 percent; no sector-specific grants.
- (b) Incorrect. It made no recommendations on sector-specific grants.
- (c) Incorrect. Statement 2 is false; sector-specific grants were dropped.
- (d) Incorrect. Statement 1 is true; the share went up to 42 percent.
Key point
14th Finance Commission (Y.V. Reddy, 2015-20): States' share raised from 32 to 42 percent; no sector-specific grants; forest cover added to the formula.
Remember
14th Finance Commission = 42 percent to States.
Common mistakes
- Assuming every Finance Commission gives sector-specific grants.
- Confusing the 14th (42 percent) with the 15th (41 percent).
- Forgetting forest cover as a new criterion.
Exam tip
13th: 32 percent. 14th: 42 percent. 15th: 41 percent.
Sources
- Finance Commission of India — Report of the Fourteenth Finance Commission (2015-20)
- Constitution of India — Article 280