Which of the following is a matter on which the Finance Commission notified by the Ministry of Finance on 31st December, 2023 shall not make its recommendation ?
- (1)The distribution between the Union and the States of the net proceeds of taxes which are to be or may be divided between them under Chapter I Part XII of the Constitution.
- (2)The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India.
- (3)The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities.
- (4)Review the present arrangements on Financing Climate Management initiatives.
Answer
Why
Correct — option (4), Review the present arrangements on Financing Climate Management initiatives.
The Finance Commission constituted by the notification of 31 December 2023 is the Sixteenth Finance Commission, chaired by Arvind Panagariya.
Its terms of reference list three matters on which it shall make recommendations. They repeat the duties in clauses (a), (b), (bb) and (c) of Article 280(3) of the Constitution: sharing central taxes, grants-in-aid to states, and support for Panchayats and Municipalities.
Options (1), (2) and (3) repeat the wording of those three matters, shortened. So each of them is something the Commission does recommend on.
Option (4) is the one that is not: Review the present arrangements on Financing Climate Management initiatives. The terms of reference do contain a review clause, but it is about disaster management.
The clause says the Commission may review the present arrangements on financing Disaster Management initiatives, with reference to the funds constituted under the Disaster Management Act, 2005, and make appropriate recommendations on them.
One changed word — "Climate" in place of "Disaster" — turns a real mandate into one the terms of reference do not contain.
Why the others are wrong
- (1)The distribution between the Union and the States of the net proceeds of taxes which are to be or may be divided between them under Chapter I Part XII of the Constitution. — This is the first matter in the terms of reference, taken from Article 280(3)(a). It is the sharing of central taxes between the Union and the States (vertical devolution), which the terms of reference pair with the allocation of that share among the states.
The Commission does recommend on it, so it cannot answer a question asking what it shall not recommend on.
- (2)The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India. — This is the second matter in the terms of reference, from Article 280(3)(b). It covers the principles for grants-in-aid to states, and the terms of reference add the sums to be paid to states under Article 275 of the Constitution.
It is a core recommendation of every Finance Commission, so it is not the matter left out.
- (3)The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities. — This is the third matter in the terms of reference. It comes from Article 280(3)(bb) for Panchayats and (c) for Municipalities, inserted by the Constitution (Seventy-third Amendment) Act, 1992 and the Constitution (Seventy-fourth Amendment) Act, 1992.
The measures are recommended on the basis of the recommendations of each State Finance Commission. It is a real mandate, so it is not the answer.
Concept
A Finance Commission is a constitutional body under Article 280. The President constitutes it every fifth year or earlier, with a Chairman and four other members.
Article 280(3) sets its duties: recommend how the net proceeds of shareable central taxes are divided between the Union and the States and among the States; the principles for grants-in-aid to States; and measures to augment a State's Consolidated Fund for Panchayats and Municipalities.
Clause (3)(d) adds any other matter the President refers "in the interests of sound finance". A Commission's terms of reference can also carry items beyond clauses (a) to (c); the Sixteenth Commission's include a review of disaster-management financing.
The Commission recommends; the Union Government decides what to accept.
The Finance Commission is a constitutional body under Article 280, and the topic falls under the syllabus head Indian Constitution, Political System & Governance. Each Commission also works to terms of reference notified for it, which can add matters beyond the constitutional duties.
The Sixteenth Commission matters for Rajasthan: its recommendations, once accepted, shape the State's share of central taxes and its grants for the five years from 1 April 2026.
The Panchayat and Municipality clause also links to Rajasthan's Panchayati Raj and urban local bodies, which draw on State Finance Commission recommendations.
Key facts
- Article 280 requires the President to constitute a Finance Commission every fifth year or earlier, with a Chairman and four other members.
- The Union Cabinet approved the Sixteenth Finance Commission's terms of reference on 29 November 2023; the Commission was constituted, with Arvind Panagariya as Chairman, on 31 December 2023.
- The terms of reference required the Sixteenth Commission's report by 31 October 2025, covering five years from 1 April 2026.
- The review clause covers financing of Disaster Management initiatives, with reference to funds constituted under the Disaster Management Act, 2005.
- The Fifteenth Finance Commission, constituted on 27 November 2017, made recommendations for six years, 2020-21 to 2025-26.
The first three rows come from Article 280(3); the review clause is disaster management, not climate management.
Study next
Common traps
- Reading "Climate Management" as "Disaster Management". One substituted word turns a real clause into one the terms of reference do not contain.
- Losing the negative in the stem. Options (1), (2) and (3) are all real mandates; the question asks for the matter the Commission shall not recommend on.
- Treating the review clause as one of the duties in clauses (a) to (c) of Article 280(3). Disaster-management financing is an extra item in this Commission's terms of reference, not a standing constitutional duty.
A Finance Commission question can quote its terms of reference and alter one detail — a word, a date or the award period. It can also ask which article or clause a duty comes from.
A question can also test who constitutes the Commission, how many members it has, or which Commission covers which years.
Related PYQs
UnlockIAS compared this question with questions from other RAS Prelims papers and found none similar enough to link.
Practice
- practice — not a real PYQ
The recommendations of the Sixteenth Finance Commission cover a period of five years commencing on:
- (a)1 April 2025
- (b)1 April 2026
- (c)1 April 2027
- (d)1 April 2031
Answer(2) — the terms of reference fix the period as five years from 1 April 2026, because the Fifteenth Commission's award runs to 2025-26. Option (1) falls inside the Fifteenth Commission's period. Option (3) matches nothing in the terms of reference. Option (4) is the day after the Sixteenth Commission's five years end. - practice — not a real PYQ
Which clause of Article 280(3) requires the Finance Commission to recommend measures to augment the Consolidated Fund of a State to supplement the resources of the Municipalities?
- (a)Clause (a)
- (b)Clause (b)
- (c)Clause (bb)
- (d)Clause (c)
Answer(4) — clause (c), inserted by the 74th Amendment, covers Municipalities. Clause (bb), option (3), is the matching clause for Panchayats. Clause (a), option (1), covers the sharing of taxes, and clause (b), option (2), covers the principles of grants-in-aid.