UPSC Prelims 2000 · General Studies

Question 10: Polity and Governance

The primary function of the Finance Commission in India is to

adistribute revenue between the Centre and the States

bprepare the Annual Budget

cadvise the President on financial matters

dallocate funds to various ministries of the Union and State Governments

AnswerThe answer is (a).

Article 280 provides for a Finance Commission every five years. Its main task is to recommend how the net proceeds of taxes should be divided between the Union and the States, and among the States, and the principles for grants-in-aid to States from the Consolidated Fund of India. The Budget is prepared by the Finance Ministry, and ministries get funds through budget allocations, not through the Commission.

Why each option is right or wrong

(a) Right: distributing tax revenue between the Centre and the States is its primary function.
(b) The annual Budget is prepared by the Union Finance Ministry, not the Finance Commission.
(c) It advises the President only on matters referred to it, which is secondary to the revenue-sharing task.
(d) Funds to ministries are allocated through the Budget, not by the Finance Commission.

Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2000, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.