Economics • Indian EconomyHard

Examine the role and constitutional mandate of the Finance Commission of India. Which of the following functions is constitutionally assigned to it?

A. Recommending the distribution of net proceeds of taxes between the Union and the states, and the allocation among states of their respective shares.✓ Correct Answer

B. Preparing the annual union budget and presenting tax proposals before the parliament.

C. Auditing accounts of all public sector undertakings and government ministries.

D. Regulating monetary policy interest rates and managing foreign exchange reserves.

💡 Solution & Explanation

Constituent provisions under Article 280 require the President of India to constitute a Finance Commission every five years or earlier to recommend the vertical devolution of tax revenues between the Union and states, and horizontal distribution among states based on criteria such as income distance, population, area, and forest cover. The commission also suggests principles governing grants-in-aid to states out of the Consolidated Fund of India. Its reports, along with explanatory memoranda on action taken, are laid before both houses of Parliament. Recommendations guide fiscal federalism dynamics in India.

🚩 Report a problem

Practice more Economics Indian Economy questions →

Examine the role and constitutional mandate of the Finance Commission of India. Which of the following functions is constitutionally assigned to it?

More Economics Indian Economy questions