Economics • Indian EconomyHard

Analyze the constitutional provisions governing the distribution of financial resources between the Union and the States in India. What role does the Finance Commission play under Article 280?

A. It is a quasi-judicial body constituted every five years by the President to recommend principles for tax devolution and grants-in-aid to states✓ Correct Answer

B. It is a permanent legislative committee of Parliament responsible for auditing annual budgetary allocations across ministries

C. It is an executive agency under the Ministry of Finance tasked with collecting direct corporate taxes from interstate corporations

D. It is an advisory tribunal established by the Supreme Court to adjudicate financial disputes between neighboring state governments

💡 Solution & Explanation

Article 280 of the Constitution mandates the appointment of a Finance Commission by the President every five years or earlier to recommend the vertical and horizontal distribution of net tax proceeds between the Union and the States. It also suggests principles governing grants-in-aid from the Consolidated Fund of India. Mistaking it for a permanent legislative audit committee ignores its specific constitutional mandate and quinquennial constitution. Recent commissions have introduced criteria such as forest cover and demographic performance in their devolution formulas.

🚩 Report a problem

Practice more Economics Indian Economy questions →

Analyze the constitutional provisions governing the distribution of financial resources between the Union and the States in India. What role does the Finance Commission play under Article 280?

More Economics Indian Economy questions