With reference to the functions and mechanisms associated with the Finance Commission (FC) in India, consider the following statements: 1. The concept of the Divisible Pool excludes surcharges and cesses levied for specific purposes. 2. The Finance Commission's grants-in-aid are meant to address both vertical and horizontal fiscal imbalances among states. Which of the statements given above is/are correct? |ForumIAS

Q. With reference to the functions and mechanisms associated with the Finance Commission (FC) in India, consider the following statements:
1.The concept of the Divisible Pool excludes surcharges and cesses levied for specific purposes.
2.The Finance Commission’s grants-in-aid are meant to address both vertical and horizontal fiscal imbalances among states.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C

Notes:

Explanation:

The Divisible Pool includes all Union taxes except surcharges and cesses levied for specific purposes under Article 271.

While tax devolution addresses horizontal imbalances, grants-in-aid help bridge revenue deficits (gap-filling grants), tackle special problems, and support local bodies — thus addressing both vertical and horizontal imbalances.

Discover more from Free UPSC IAS Preparation Syllabus and Materials For Aspirants

Subscribe to get the latest posts sent to your email.

Discover more from Free UPSC IAS Preparation Syllabus and Materials For Aspirants

Post-Mains Strategy Session by Mr. Ayush Sinha | ForumIAS