BPSC 71st CCE Prelims General Studies · Question 66 of 150

Correct — D, Finance Commission constituted by the Governor. The stem is a near-verbatim lift from the Constitution, and spotting that is the whole question. Article 243-I(1), inserted into the new Part IX by the Constitution (Seventy-third Amendment) Act, 1992, opens: "The Governor of a State shall, as soon as may be within one year from the commencement of the Constitution (Seventy-third Amendment) Act, 1992, and thereafter at the expiration of every fifth year, constitute a Finance Commission to review the financial position of the Panchayats". The examiner's phrase — 'review financial position of the Panchayats' — is that clause's own wording, so the only option that can be right is the one naming both the body (a Finance Commission) and the authority that constitutes it (the Governor). What this State Finance Commission then does is spelt out in the rest of 243-I(1). It recommends to the Governor: under (a)(i) the principles that should govern the distribution between the State and the Panchayats of the net proceeds of the taxes, duties, tolls and fees leviable by the State, and the allocation of those shares between Panchayats at all levels; under (a)(ii) which taxes, duties, tolls and fees may be assigned to, or appropriated by, the Panchayats; under (a)(iii) the grants-in-aid to the Panchayats from the Consolidated Fund of the State; under (b) the measures needed to improve the financial position of the Panchayats; and under (c) any other matter referred to it by the Governor in the interests of sound finance. Article 243-I(4) closes the loop — the Governor must cause every recommendation, together with an explanatory memorandum on the action taken on it, to be laid before the Legislature of the State, which is what converts an advisory report into a document the House can debate. Note the deliberate division of labour written into the Article: the Governor constitutes the Commission and lays its report; the State Legislature, under 243-I(2), fixes by law the Commission's composition, the qualifications for its members and the manner of their selection; and under 243-I(3) the Commission determines its own procedure. Because the 73rd Amendment came into force on 24 April 1993, the first round of State Finance Commissions was constitutionally due by 24 April 1994, and a fresh one has been due every fifth year since.

• (a)Chief Minister — The strongest distractor, because in political practice the Chief Minister heads the government that receives the report and decides how much of it to accept. But Part IX gives the Chief Minister no role whatever in this: Article 243-I names the Governor as the authority who constitutes the Commission, and 243-I(4) makes the Governor — not the CM — lay the recommendations before the House. UPSC set this exact substitution in 2025, where Statement III read 'The Chief Minister of a State constitutes a commission to review the financial position of Panchayats…' and the key marked it as not correct.
• (b)Chairman of Block Committee —
• (c)Chairman of District Council — The same defect as (b), one tier higher. The 'District Council' is the Zila Parishad, the district-level Panchayat under Article 243B(1), and its chairperson is an elected office-holder of a body that stands to gain from a favourable devolution formula. His genuine financial role lies elsewhere — consolidating district plans through the District Planning Committee under Article 243ZD, which came with the 74th Amendment, not with the 73rd.

The 73rd Amendment did far more than order elections to Panchayats every five years; it built them a fiscal constitution, because devolving 29 subjects from the Eleventh Schedule to a body with no money only devolves responsibility. That fiscal architecture has three storeys. At the bottom, Article 243-I obliges the Governor to constitute a State Finance Commission every fifth year to review Panchayat finances and to recommend how State tax revenue should be shared with them, which local taxes they may levy or appropriate, and what grants-in-aid should flow from the Consolidated Fund of the State. In the middle, Article 243-Y makes that same Commission perform the identical exercise for the urban local bodies created by the 74th Amendment under Part IX-A, so one body covers rural and urban local government alike. At the top, Articles 280(3)(bb) and 280(3)(c) require the Union Finance Commission to recommend measures to augment the Consolidated Fund of a State so that the State can supplement the resources of its Panchayats and Municipalities — and, critically, it must do so 'on the basis of the recommendations made by the Finance Commission of the State'. Both of those Union-level clauses were themselves inserted by the 73rd and 74th Amendments. Read the chain in that order and it is obvious why the reviewer must sit outside the Panchayats: the State Finance Commission's report is the document on which both the State's own devolution and the State's claim on Union grants for local bodies rest.

Three moves get you to (d) without recalling the Article number at all. First, read the stem as a quotation rather than as a question. 'Review the financial position of the Panchayats' is not a paraphrase an examiner invented; it is constitutional text, and BPSC lifts such phrases whole. When a stem sounds oddly formal, ask which provision it was copied from. Second, count the kinds of thing on offer: three options are individual office-holders and only one is an institution. Constitutional review, audit and recommendation functions are almost always vested in bodies with fixed terms and statutory qualifications — the CAG, the Election Commission, the Finance Commission — precisely so that they survive a change of government. Third, apply the separation between reviewer and reviewed. A Block Committee chairman heads the intermediate Panchayat and a Zila Parishad chairman heads the district Panchayat, so both are on the receiving end of the review; that eliminates (b) and (c) together in one stroke, leaving a straight choice between the Chief Minister and a Commission constituted by the Governor. The single discriminating fact is the pairing of office to Article: Governor with Article 243-I for local bodies, President with Article 280 for the States. Every trap in this family is built by crossing those two wires — putting the President over the State Finance Commission, or, as in the option set here and in UPSC's 2025 paper, putting the Chief Minister in the Governor's place.

• Article 243-I(1): the Governor of a State shall constitute a Finance Commission — within one year of the commencement of the Constitution (Seventy-third Amendment) Act, 1992 and thereafter at the expiration of every fifth year — 'to review the financial position of the Panchayats' and make recommendations to the Governor.
• Part IX (Articles 243 to 243-O) and the Eleventh Schedule's 29 subjects were inserted by the 73rd Amendment, which came into force on 24 April 1993; the first State Finance Commissions were therefore due by 24 April 1994, and 24 April is now observed as National Panchayati Raj Day.
• The division of powers inside Article 243-I: clause (2) leaves composition, member qualifications and manner of selection to the State Legislature by law; clause (3) lets the Commission determine its own procedure; clause (4) requires the Governor to lay every recommendation, with an action-taken memorandum, before the State Legislature.
• Article 243-Y makes the same Commission review the financial position of the Municipalities under Part IX-A, added by the 74th Amendment (in force 1 June 1993, Twelfth Schedule, 18 subjects) — one Commission, two sets of local bodies.
• Articles 280(3)(bb) and (c) require the Union Finance Commission to recommend measures to augment a State's Consolidated Fund to supplement the resources of its Panchayats and Municipalities 'on the basis of the recommendations made by the Finance Commission of the State' — the Union Commission is constituted by the President under Article 280(1), and its members' qualifications are fixed by Parliament by law through the Finance Commission (Miscellaneous Provisions) Act, 1951.
• Scale of what is being reviewed: speaking at the National Panchayati Raj Day event at Madhubani, Bihar on 24 April 2025, the Prime Minister put devolution to Panchayats at more than Rs 2 lakh crore over the preceding decade, alongside over 2 lakh Gram Panchayats connected to the internet and 30,000 new Panchayat Bhawans built.

• Crossing the wires between the two Finance Commissions — State Finance Commission under Article 243-I constituted by the Governor, Union Finance Commission under Article 280 constituted by the President
• Reading 'constituted by the Governor' as 'composition decided by the Governor' — composition, qualifications and manner of selection are for the State Legislature by law under Article 243-I(2)
• Attributing District Planning Committees to the 73rd Amendment; Article 243ZD came with the 74th

BPSC asks it as a bare one-liner with four nouns, three of them people, and the entire test is whether you can attach 'Finance Commission' to 'Governor'. UPSC almost never asks it that plainly: in 2010 it approached the same clause sideways, asking which authority makes recommendations to the Governor on the taxes Panchayats may appropriate, and in 2025 it buried the identical fact inside a three-statement 'which are not correct' set that quietly replaced the Governor with the Chief Minister. Same provision, harder packaging — so learn the clause, not the sentence.

• practice — not a real PYQ

  The State Finance Commission that reviews the financial position of Panchayats is constituted under which Article of the Constitution?

  • (a)Article 243-G
  • (b)Article 243-I
  • (c)Article 243-K
  • (d)Article 280

  Answer(b) Article 243-I — 243-G deals with the powers, authority and responsibilities of Panchayats, 243-K with the State Election Commission, and 280 with the Union Finance Commission constituted by the President.

• practice — not a real PYQ

  Under Part IX of the Constitution, who determines the composition of the State Finance Commission and the qualifications required for appointment as its members?

  • (a)The Governor by order
  • (b)The Legislature of the State by law
  • (c)Parliament by law
  • (d)The State Election Commission

  Answer(b) The Legislature of the State by law — Article 243-I(2) leaves composition, qualifications and manner of selection to State law, while the Governor's role under 243-I(1) is to constitute the Commission and under 243-I(4) to lay its report before the House.