Q1. Under which Article of the Constitution of India is the State Finance Commission constituted to review the financial position of the Panchayats?
State Finance Commission and Fiscal Devolution in Rajasthan: RAS Prelims MCQs
59 RAS Prelims MCQs on the State Finance Commission and fiscal devolution in Rajasthan cover the constitutional provisions, the chairpersons, the criteria for sharing funds with local bodies and the audit of local finances. The Articles, the first chairman, the order of chairpersons and the problems of implementation are asked as facts and statements.
Practice questions based on the RPSC RAS Prelims syllabus. They follow the exam pattern but are not past-paper questions.
Showing 1–10 of 59 questions
Q2. Which Constitutional provision mandates the State Finance Commission to review the financial position of the Municipalities (Urban Local Bodies)?
Explanation
Article 243Y of the Indian Constitution provides the legal framework for reviewing the financial status of Municipalities. It specifies that the State Finance Commission, established under Article 243I, must recommend measures to improve the financial health of urban local bodies. This includes suggesting principles for the equitable distribution of net tax proceeds between the state and various municipalities.
Q3. Consider the following statements regarding the composition and appointment of the State Finance Commission:
Statement I: The State Finance Commission is constituted by the Chief Minister of the State.
Statement II: The composition of the Commission, the qualifications requisite for appointment as members thereof, and the manner of their selection are determined by the State Legislature by law.
Which of the above statements is/are correct?
Statement I: The State Finance Commission is constituted by the Chief Minister of the State.
Statement II: The composition of the Commission, the qualifications requisite for appointment as members thereof, and the manner of their selection are determined by the State Legislature by law.
Which of the above statements is/are correct?
Explanation
The Governor, not the Chief Minister, is the constitutional authority responsible for constituting the State Finance Commission. However, the state legislature is empowered to determine the commission’s composition, member qualifications, and selection methods through statutory laws. This legal framework ensures that the commission operates with professional expertise and administrative transparency while fulfilling its mandate to review local finances.
Q4. Which of the following best describes the terms of reference of the Rajasthan State Finance Commission?
Explanation
The Rajasthan State Finance Commission is primarily tasked with establishing the criteria for sharing the state’s tax revenues with local institutions. It formulates principles for the distribution of taxes, duties, and tolls between the state and local bodies, as well as among the bodies themselves. These recommendations ensure that local governments have the necessary funds for developmental activities.
Q5. In the context of fiscal devolution, what does the term "vertical devolution" refer to?
Explanation
Vertical devolution in state-local fiscal relations refers to the top-down allocation of financial resources. It specifically involves determining the total percentage share of the state’s divisible tax pool that should be transferred to local self-government institutions. This process ensures that local bodies receive a predictable and significant stream of revenue from state-level collections to fund their essential services.
Q6. Consider the following statements regarding devolution:
I. Vertical devolution determines the aggregate share of state taxes to be transferred to local bodies.
II. Horizontal devolution decides the allocation formula among individual Panchayats and Urban Local Bodies.
III. The State Finance Commission has no role in horizontal devolution.
Which of the above statement(s) is/are correct?
I. Vertical devolution determines the aggregate share of state taxes to be transferred to local bodies.
II. Horizontal devolution decides the allocation formula among individual Panchayats and Urban Local Bodies.
III. The State Finance Commission has no role in horizontal devolution.
Which of the above statement(s) is/are correct?
Explanation
Vertical devolution determines the total share of state resources moving to local bodies collectively. In contrast, horizontal devolution establishes the formula for dividing that pool among individual units based on specific criteria like population or area. Both processes are essential functions of the State Finance Commission, ensuring that funds are distributed both adequately from the state and equitably among districts.
Q7. Horizontal devolution among Panchayats and Urban Local Bodies is typically based on certain weighted criteria. Which of the following is most commonly used as a primary criterion by State Finance Commissions?
Explanation
State Finance Commissions often prioritize population as the primary criterion for horizontal devolution because it reflects the relative scale of demand for basic civic services. A higher population indicates a greater need for infrastructure maintenance and public amenities. Using this metric ensures that funds are distributed based on the number of residents served, promoting fairness among different local government units.
Q8. The following question consists of two statements, Assertion (A) and Reason (R). Answer the question using the options given below.
Assertion (A): The State Finance Commission recommends principles for grants-in-aid to Panchayats from the Consolidated Fund of the State.
Reason (R): Grants-in-aid are primarily designed to eliminate all own-source revenue collection requirements for local bodies.
Assertion (A): The State Finance Commission recommends principles for grants-in-aid to Panchayats from the Consolidated Fund of the State.
Reason (R): Grants-in-aid are primarily designed to eliminate all own-source revenue collection requirements for local bodies.
Explanation
The State Finance Commission recommends grants-in-aid from the Consolidated Fund of the State to support the financial needs of Panchayats. However, these grants are meant to bridge fiscal gaps rather than eliminate the requirement for own-source revenue. Local bodies are still encouraged to generate their own funds through local taxes to maintain autonomy and ensure sustainable financial management.
Q9. What is the primary purpose of grants-in-aid recommended by the State Finance Commission to local bodies?
Explanation
Grants-in-aid recommended by the State Finance Commission are essential for addressing the difference between a local body’s expenditure requirements and its own revenue generation. These funds are primarily used to support the delivery of basic civic services like sanitation, water supply, and lighting. They ensure that local governments can function effectively despite limited direct taxation powers or varying economic conditions.
Q10. Which of the following represents the correct chronological sequence of Chairpersons of the Rajasthan State Finance Commission?
Explanation
The Rajasthan State Finance Commission has seen several chairpersons since its inception. K.K. Goyal led the first commission, followed by Hira Lal Devpura for the second. Manik Chand Surana chaired the third commission, and B.D. Kalla served as the chairman of the fourth. This chronological sequence reflects the historical development and periodic review of local body finances in Rajasthan.Answer key for these questions
| Q | Correct answer |
|---|---|
| 1 | (c) Article 243I |
| 2 | (d) Article 243Y |
| 3 | (b) Only Statement II is correct |
| 4 | (d) To recommend principles for distributing state taxes between the State and local bodies, and among local bodies |
| 5 | (d) The allocation of the state’s divisible tax pool share from the State Government to the local bodies |
| 6 | (a) I and II |
| 7 | (c) Population of the local body |
| 8 | (c) A is true but R is false. |
| 9 | (d) To bridge the fiscal gap and support basic civic service delivery |
| 10 | (a) K.K. Goyal - Hira Lal Devpura - Manik Chand Surana - B.D. Kalla |
Key facts from State Finance Commission and Fiscal Devolution in Rajasthan
- The State Finance Commission is constituted under Article 243I to review the financial position of Panchayats; Article 243Y applies to Municipalities.
- K. K. Goyal chaired the First State Finance Commission of Rajasthan; the order of chairpersons is K. K. Goyal, Hira Lal Devpura, Manik Chand Surana and B. D. Kalla.
- Horizontal devolution among local bodies is based on weighted criteria, and the population of the local body is the main one.
- Untied grants strengthen local autonomy and decentralised planning.
- The Local Fund Audit Department conducts the statutory audit of Panchayati Raj Institutions.
- State Finance Commissions have recommended a share of royalties from minor minerals for local bodies; a gap between recommendations and implementation causes fiscal stress.
Frequently asked questions
How many RAS Prelims practice MCQs are there on State Finance Commission and Fiscal Devolution in Rajasthan?
This page has 59 practice MCQs on State Finance Commission and Fiscal Devolution in Rajasthan (Rajasthan Economy). Each has the correct answer, and most have an explanation.
Under which Article is the State Finance Commission constituted?
Article 243I for Panchayats, and Article 243Y extends the same review to Municipalities. The Governor constitutes the Commission every five years to review local body finances and to recommend how funds should be shared with them.
Who chaired the first State Finance Commission of Rajasthan?
K. K. Goyal. The later chairpersons, in order, were Hira Lal Devpura, Manik Chand Surana and B. D. Kalla, each for a five-year term, so the Commission has been reconstituted regularly.
Who audits the Panchayati Raj Institutions in Rajasthan?
The Local Fund Audit Department conducts the statutory audit of the accounts of Panchayati Raj Institutions. The audit checks that grants and funds are spent as the rules allow.