With reference to the Finance Commission of India, which of the following statements is correct?

Question

Question

This question was previously asked in

Official UPSC Civil Services Exam 2011 Prelims Part A

It encourages the inflow of foreign capital for infrastructure development.
It facilitates the proper distribution of finances among the Public Sector Undertaking.
It ensures transparency in financial administration.
None of the statements (a), (b) and (c) given above is correct in this context.

Answer 1

The correct answer is None of the statements (a), (b) and (c) given above is correct in this context.

Key Points

Finance Commission:
- Finance Commission is a constitutional body.
- Finance Commission was constituted to recommend the distribution of the net proceeds of taxes between the Centre and states, and among the states.
- It was established under Article 280 of the Indian Constitution.
- The Commission was constituted for every five years by the President.
- The Commission consists of five members including the chairperson.
- As of March 2021, Nand Kishore Singh was the current chairperson of the 15th Finance Commission.
Functions of the Finance Commission of India:
- The net tax proceeds distribution to be divided between the Centre and the states, and the allocation of the same between states. (not among the Public Sector Undertaking).
- The principles governing the grants-in-aid to the states by the Centre out of the consolidated fund of India.
- The steps required to extend the consolidated fund of a state to boost the resources of the panchayats and the municipalities of the state on the basis of the recommendations made by the state Finance Commission.

Additional Information

The Chairman of the Commission shall be selected from among persons who have had experience in public affairs, and the four other members shall be selected from among persons who--
- are, or have been, or are qualified to be appointed as Judges of a High Court; or
- have special knowledge of the finances and accounts of Government, or
- have had wide experience in financial matters and in administration, or
- have special knowledge of economics.

16th Finance Commission :

Constitution Date: December 31, 2023.
Chairman: Shri Arvind Panagariya, former Vice-Chairman of NITI Aayog.
Mandate: To define the financial relations between the central government and state governments for the period 2026-2031.