UPSC Prelims 2015 · Question 2 of 98
UPSC Prelims 2015 question on Fourteenth Finance Commission
- ExamUPSC CSE
- Year2015
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicPublic Finance
- DifficultyMedium
- TypeStatement
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.
Show answer
Answer: A. 1 only
Verdict
The answer is 1 only. The Fourteenth Finance Commission raised the States' share from 32 to 42 per cent, but it did not make sector specific grant recommendations.
Analysis
Statement 1 is CORRECT. The FFC raised the share of States in the central divisible pool from 32 per cent to 42 per cent, the largest ever increase in vertical tax devolution. Statement 2 is INCORRECT. Unlike the Thirteenth Finance Commission, the FFC deliberately did not recommend sector specific grants, taking the view that untied devolution gives States greater spending autonomy. That contrast between the Thirteenth and Fourteenth Commissions is precisely what the question is testing.
Source
Economic Survey, Volume 1, Chapter 10, page 131.
How to crack it
For any Finance Commission, hold four things: the chair, the award period, the devolution percentage and one signature departure from its predecessor. Here the signature departure is the shift from tied sector grants to untied devolution, which is also the philosophical point behind the higher percentage. Learning the departure rather than the details is what lets you answer statement 2 without having read the report. The Commission is a constitutional body under Article 280, so its recommendations recur every award cycle.