UPSC Prelims 2025 Q66: Indian Economy – Fiscal Policy & Budget
Which of the following statements with regard to recommendations of the 15th Finance
Commission of India are correct?
I. It has recommended grants of ₹ 4,800 crores from the year 2022 - 23 to the year 2025 - 26 for
incentivizing States to enhance educational outcomes. II. 45% of the net proceeds of Union taxes
are to be shared with States. III. ₹ 45,000 crores are to be kept as performance - based incentive
for all States for carrying out agricultural reforms.
IV. It re - introduced tax - effort criteria to reward fiscal performance.
Select the correct answer
using the code given below.
- (a) I, II and III
- (b) I, II and IV
- (c) I, III and IV
- (d) II, III and IV
Answer: (c) I, III and IV
Explanation
Recommendations of the 15th Finance Commission
Chairman: N.K. Singh.
Award period: 2021-22 to 2025-26.
| Statement | Verdict | Fact |
|---|---|---|
| I. Grants of Rs 4,800 crores from 2022-23 to 2025-26 for incentivizing States to enhance educational outcomes | Correct | Rs 1,200 crore a year for four years |
| II. 45% of the net proceeds of Union taxes are to be shared with States | Incorrect | The share is 41 percent |
| III. Rs 45,000 crores as performance-based incentive for all States for carrying out agricultural reforms | Correct | Tied to farm-sector reforms |
| IV. It re-introduced tax-effort criteria to reward fiscal performance | Correct | 'Tax and fiscal efforts' returned with a weight of 2.5 percent |
Devolution formula:
| Criterion | Weight (percent) |
|---|---|
| Income distance | 45 |
| Population (2011) | 15 |
| Area | 15 |
| Demographic performance | 12.5 |
| Forest and ecology | 10 |
| Tax and fiscal efforts | 2.5 |
Answer: (c) I, III and IV.
Why each option is right or wrong
- (a) Incorrect. Statement II is false; the States' share is 41 percent, not 45.
- (b) Incorrect. Statement II is false, and statement III is true.
- (c) CORRECT. Statements I, III and IV are correct recommendations of the 15th Finance Commission.
- (d) Incorrect. Statement II, on 45 percent, is false.
Key point
15th Finance Commission (N.K. Singh, 2021-26): 41 percent to States; income distance 45, tax and fiscal efforts 2.5; Rs 4,800 crore for education, Rs 45,000 crore for farm reforms.
Remember
15th Finance Commission: 41 percent, tax effort back.
Common mistakes
- Mixing up 41 percent (15th) with 42 percent (14th).
- Not knowing that tax effort came back as a criterion.
- Missing the swap of 45,000 crore (a real figure) with 45 percent (a false one).
Exam tip
The number 45 appears three times in this question; only one use is false.
Sources
- Finance Commission of India — Report of the Fifteenth Finance Commission for 2021-26
- Press Information Bureau — Recommendations of the Fifteenth Finance Commission