← All questionsGS2 · 2021 · Polity ·14th Finance Commission and State Finances
QUESTION 3
GS2
10 marks

How have the recommendations of the 14th Finance Commission of India enabled the States to improve their fiscal position?

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7 min
150 words

What the examiner wants

Explain how the 14th Finance Commission's recommendations improved the fiscal position of states.

ExplainMake clear how and why it happens: causes, process, and an example for each point.

Demand-wise check

  1. 1Key change: states' share in the divisible pool raised from 32% to 42%≈30 words
  2. 2More untied funds; new criteria (forest cover 7.5%, 2011 population)≈30 words
  3. 3Revenue deficit grants to 11 states; grants to local bodies≈30 words
  4. 4Limits: cut in centrally sponsored scheme shares, rise in cesses and surcharges outside the pool≈30 words

Open in about 20 words and close in about 20.

Answer plan

ContextKey recommendationsEffect on state fiscal spaceLimitsConclusion

Where marks usually go

  • Listing recommendations without showing the effect on state finances
  • Ignoring the counter-effect of cesses

Draw this

  • Bar: devolution 32% (13th FC) → 42% (14th) → 41% (15th)

Value addition

  • DataThe 14th FC (2015–20) raised states' share from 32% to 42%, the largest jump ever; the 15th FC set it at 41% after J&K's reorganisation.14th and 15th Finance Commission reports
  • DataCesses and surcharges, which are not shared with states, rose to about a fifth of the Centre's gross tax revenue.Union Budget documents / 15th FC report

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