Previous Year Question
Which of the following statements with regard to the recommendations of the 15th Finance Commission of India are correct?
I. It has recommended grants of ₹4,800 crores from the year 2022-23 to the year 2025-26 for incentivising States to enhance educational outcomes.
II. 45% of the net proceeds of Union taxes are to be shared with States.
III. ₹45,000 crores are to be kept as performance-based incentive for all States for carrying out agricultural reforms.
IV. It reintroduced tax effort criteria to reward fiscal performance.
Select the correct answer using the codes given below:
I, II and III
I, II and IV
I, III and IV
II, III and IV
Correct Answer: C
Detailed Solution
Statement I is correct. The Fifteenth Finance Commission recommended performance-based grants totalling ₹4,800 crore for the period from 2022-23 to 2025-26 to improve school education outcomes in the States. These grants were intended to improve the quality of education, students’ learning outcomes and the performance of States.
Statement II is incorrect. The Commission recommended that 41% of the divisible pool of Union taxes should be devolved to the States, not 45%. The Fourteenth Finance Commission had recommended 42%. The Fifteenth Finance Commission adjusted this share by one percentage point following the reorganisation of the erstwhile State of Jammu and Kashmir into the Union Territories of Jammu and Kashmir and Ladakh.
Statement III is correct. The Commission provided a performance-based incentive of ₹45,000 crore for all States to undertake agricultural reforms. It was intended to promote structural reforms in agriculture, improve land-leasing arrangements, facilitate agricultural marketing and trade, and enhance agricultural productivity.
Statement IV is correct. The Fifteenth Finance Commission reintroduced the tax and fiscal efforts criterion in the horizontal distribution formula and assigned it a weight of 2.5%. It sought to reward States that mobilised their own tax revenue effectively relative to their Gross State Domestic Product.