Finance Commission

Question 1

Constitutional Provision

Answer 1

Article 280

Question 2

Functions of FC

Answer 2

Mnemonic: PGPM

1. Distribution of net proceeds of taxes between Center and the States, to be divided as per their respective contributions to the taxes.
2. Determine factors governing Grants in Aid to the states and the magnitude of the same
3. To make recommendations to the president as to the measures needed to augment the Consolidated Fund of a State to supplement the resources of the panchayats and municipalities in the state on the basis of the recommendations made by the finance commission of the state.
4. Any other matter related to it by the president in the interest of sound finance

Question 3

Composition of FC

Answer 3

Mnemonic Public HEFA

1. Public Affairs. Chairman
2. High Court Judge
3. Economist
4. Finance and Accounts
5. Administration

Question 4

15th FC ToR

Answer 4

First 4 points from Function: PGPM

Other Matters:

Census 2011 for calculations
New India 2022 Vision
Measures for fiscal Discipline and Fiscal Consolidation
Financing Disaster Management Initiatives
Performance based incentives to states
Ways for allocation of Non lapsable fund for defence and internal security

Question 5

Special Category States

Answer 5

Recommended by 5th FC. 1969

Criteria: Mnemonic TLP IF

Hilly and difficult Terrain
Low Population density/presence of sizeable tribal population
Strategic location along International Borders
Economic And Infra backwardness
Non viable nature of state finances

• Benefits:

Central assistance
Debt swapping and debt relief schemes
Tax concessions