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UPSC Prelims 2011 · Polity · Constitutional Bodies & Governance
With reference to the Finance Commission of India, which of the following statements is correct?
- (a) It encourages the inflow of foreign capital for infrastructure development
- (b) It facilitates the proper distribution of finances among the Public Sector Undertakings
- (c) It ensures transparency in financial administration
- (d) None of the statements (a), (b) and (c) given above is correct in this context
Show the answer and explanation
Answer: (d) None of the statements (a), (b) and (c) given above is correct in this context
The FC recommends how taxes are shared between Union and States and among States, and the principles of grants-in-aid (Art. 280). None of (a)–(c) describes that.
The idea
Finance Commission (Art. 280): quasi-judicial, set up every five years by the President · Chairman + 4 members · recommends vertical (Union↔States) and horizontal (among States) devolution, grants-in-aid, and measures to augment Panchayat/Municipal funds. The 16th FC (Arvind Panagariya) covers 2026–31.
Why the others are wrong
(a) Foreign capital is handled by the Finance Ministry, RBI and FDI policy — not the Finance Commission.
(b) PSUs are not in its remit.
(c) Too vague; transparency in accounts is the CAG’s area.
The trap
Every option sounds like something a finance body might do. The Finance Commission’s job is narrow: sharing taxes and grants.
🔒 FC = Art. 280 · every 5 years · Chairman + 4 · tax devolution + grants-in-aid · recommendations are advisory, laid before Parliament (Art. 281).
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