Multiple choice

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

  1. It encourages the inflow of foreign capital for infrastructure development.

  2. It facilitates the proper distribution of finances among the Public Sector Undertakings.

  3. It ensures transparency in financial administration.

  4. None of the statements (1), (2) and (3) given above is correct in this context.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Functions of the Finance Commission can be explicitly stated as: 

  1. Distribution of net proceeds of taxes between Centre 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. Work with the State Finance Commissions and suggest measures to augment the Consolidated Fund of the States so as to provide additional resources to Panchayats and Municipalities in the state. 
  4. Any other matter referred to by the President in the interest of sound finance.

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