Which of the following statements with regard to recommendations of the 15th Finance Commission of India are correct? 1. It has recommended grants of ₹ 4,800 crores from the year 2022-23 to the year 2025-26 for incentivizing States to enhance educational outcomes. 2. 45% of the net proceeds of Union taxes are to be shared with States. 3. ₹ 45,000 crores are to be kept as performance-based incentive for all States for carrying out agricultural reforms. 4. It reintroduced tax effort criteria to reward fiscal performance. Select the correct answer using the code given below.
A
1, 2 and 3
B
1, 2 and 4
C
1, 3 and 4
Correct Answer
D
2, 3 and 4
Explanation
Statements 1, 3, and 4 are correct as the 15th Finance Commission recommended specific performance-based grants for education and agriculture and reintroduced "Tax and Fiscal Effort" (with a 2.5% weightage) as a criterion for horizontal distribution. Statement 2 is incorrect because the commission recommended a vertical devolution of 41% of the divisible pool to the states, not 45%. The core concept being tested is the specific fiscal recommendations of the Finance Commission regarding the vertical and horizontal distribution of tax proceeds and performance-linked incentives.
Indian EconomyFinance Commission & Fiscal Federalism15th Finance CommissionUnion taxesPerformance-based incentiveTax effort criteriaGrantsFiscal Federalism