Economics • Indian EconomyHard
Analyze the structural impact of the Fourteenth and Fifteenth Finance Commission recommendations regarding vertical and horizontal tax devolution on the fiscal autonomy and revenue receipts of Uttarakhand. Which factor receives significant weight in horizontal devolution formulas that benefits hilly states?
A. Forest and ecology criteria recognizing the ecosystem services and opportunity costs borne by states with high forest cover✓ Correct Answer
B. Maritime coastline length and deep-water port capacity
C. Total production volume of commercial crude steel
D. Density of multinational corporate headquarters in urban centers
💡 Solution & Explanation
Finance Commission devolution formulas assign substantial weightage to forest cover and ecological benefits, compensating hill states like Uttarakhand for maintaining dense forests that provide environmental services to the entire nation while foregoing commercial timber exploitation. This criteria bolsters untied central transfers to the state budget. Grants-in-aid for revenue deficit further support hill state fiscal stability.
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