Which of the following statements with regard to the constitution of Finance Commission is/are correct? 1. The Government of India has recently constituted the Sixteenth Finance Commission under the Chairmanship of Dr. Arvind Panagariya. 2. Finance Commission is constituted in pursuance to Article 263 of the Constitution of India. Select the answer using the code given below:
- (a)1 only
- (b)2 only
- (c)Both 1 and 2
- (d)Neither 1 nor 2
Correct — A, statement 1 only. The Sixteenth Finance Commission was constituted by the Union Government in late 2023 with Dr. Arvind Panagariya as its Chairman, so statement 1 is correct. Statement 2 misnames the Article — the Finance Commission is constituted by the President under Article 280 of the Constitution; Article 263 is the provision that empowers the President to establish an Inter-State Council. Since only statement 1 is accurate, the answer is '1 only'.
- (b)2 only — Reverses the truth — statement 2 is the false one because the Finance Commission comes under Article 280, not Article 263.
- (c)Both 1 and 2 — Statement 2 is wrong on the Article number, so both cannot be correct.
- (d)Neither 1 nor 2 — Statement 1 is factually correct — the Sixteenth Finance Commission under Dr. Arvind Panagariya was indeed constituted — so 'neither' is wrong.
The Finance Commission is a constitutional body set up under Article 280, which the President constitutes every fifth year (or earlier) to recommend how tax revenues are shared between the Union and the States and the principles governing grants-in-aid. The Sixteenth Finance Commission, under Dr. Arvind Panagariya, will frame recommendations for the five years beginning April 2026.
The trap is a plausible-looking Article number. Aspirants remember the Finance Commission is 'in the Constitution' and may accept Article 263, but 263 belongs to the Inter-State Council. Anchoring the Finance Commission firmly to Article 280 defeats the distractor.
- The Finance Commission is constituted by the President under Article 280 of the Constitution.
- The Sixteenth Finance Commission was constituted on 31 December 2023 with Dr. Arvind Panagariya as Chairman.
- Article 263 empowers the President to establish an Inter-State Council, a different body.
- The Finance Commission recommends the vertical and horizontal sharing of taxes and the principles for grants-in-aid to the States.
Statement 1 (Panagariya, 16th FC) is true; statement 2 is false because the Finance Commission is Article 280, not 263 — so the answer is 1 only.
- Accepting Article 263 for the Finance Commission — it is Article 280; 263 is the Inter-State Council.
- Confusing the Finance Commission (constitutional, Article 280) with the erstwhile Planning Commission or NITI Aayog (non-constitutional).
Asked by pairing a true current-affairs fact with a false Article number — verify each statement separately.
Which one of the following authorities recommends the principles governing grants-in-aid of the revenues to the states out of the Consolidated Fund of India?
- (a) Finance Commission
- (b) Inter-State Council
- (c) Union Ministry of Finance
- (d) Public Accounts Committee
Answer(a) Finance Commission — Article 280 mandates it to recommend the principles governing grants-in-aid to the States.
Directly tests the same Article 280 role and even lists the Inter-State Council as a distractor — the exact body behind the Article 263 trap in this NDA question.
The primary function of the Finance Commission in India is to
- (a) distribute revenue between the Centre and the States
- (b) prepare the Annual Budget
- (c) advise the President on financial matters
- (d) allocate funds to various ministries of the Union and State Governments
Answer(a) distribute revenue between the Centre and the States — its core Article 280 function is recommending Centre-State revenue sharing.
Reinforces what the Finance Commission actually does under Article 280 — the constitutional basis this NDA statement misattributes to Article 263.
- practice — not a real PYQ
Under which Article of the Constitution does the President constitute the Finance Commission of India?
- (a)Article 263
- (b)Article 280
- (c)Article 324
- (d)Article 356
Answer(b) Article 280 — it provides for a Finance Commission every fifth year or earlier to recommend Centre-State revenue sharing.
- practice — not a real PYQ
Who is the Chairman of the Sixteenth Finance Commission of India?
- (a)N. K. Singh
- (b)Y. V. Reddy
- (c)Arvind Panagariya
- (d)Bibek Debroy
Answer(c) Arvind Panagariya — the economist and former NITI Aayog Vice-Chairman heads the 16th Finance Commission.