Q21. In Rajasthan, the primary responsibility for conducting the statutory audit of Panchayati Raj Institutions and Urban Local Bodies rests with:
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 21–30 of 59 questions
Q22. A persistent gap between State Finance Commission recommendations and actual implementation often leads to which of the following effects on local bodies?
Explanation
When there is a significant gap between the recommendations of the State Finance Commission and their actual implementation, local bodies often suffer from severe financial shortages. This fiscal stress leads to delays in providing essential services like sanitation, lighting, and water supply. Without the timely release of devolved funds, local planning becomes uncertain, hindering the overall development and maintenance of local infrastructure.
Q23. Match the following revenue sources in List I with the competent authority generally associated with them in List II:
| Revenue Source | Competent Authority |
|---|---|
| A. Corporate Income Tax | i. Union Government |
| B. Agricultural Land Revenue | ii. State Government |
| C. Property Tax (House Tax) | iii. Urban Local Bodies |
| D. Market Fees (Mandi/Haat) | iv. Panchayati Raj Institutions |
Explanation
Different government levels have specific revenue authorities. Corporate Income Tax is collected by the Union Government, while Agricultural Land Revenue falls under the State Government. Urban Local Bodies are typically responsible for Property Tax, and Panchayati Raj Institutions often manage fees from local markets and haats.
Q24. How does the State Finance Commission attempt to reduce inter-district fiscal disparities?
Explanation
To address fiscal inequalities among districts, the State Finance Commission uses a horizontal devolution formula that includes equity-based criteria. By giving more weight to factors like regional backwardness and the distance from the highest per capita income, the commission ensures that poorer regions receive more resources. This approach helps bridge the developmental gap and provides disadvantaged areas with the necessary financial support.
Q25. Consider the following major heads of expenditure for local bodies:
I. Payment of salaries and administrative expenses
II. Provision of core civic services like street lighting and sanitation
III. Defense procurement and border security
Which of the above identified expenditure heads are valid for local bodies?
I. Payment of salaries and administrative expenses
II. Provision of core civic services like street lighting and sanitation
III. Defense procurement and border security
Which of the above identified expenditure heads are valid for local bodies?
Explanation
Local bodies are responsible for administrative costs, including salaries, and the provision of essential civic amenities such as sanitation and street lighting. These constitute their primary expenditure heads. In contrast, national security and defense procurement are exclusive functions of the Union Government. Local government spending is strictly confined to the functions and duties devolved to them under the constitutional and state legal frameworks.
Q26. Performance grants for local bodies are best defined as:
Explanation
Performance grants are financial transfers designed to encourage local bodies to adopt better administrative and financial practices. These grants are not guaranteed; they are provided only when a local body meets specific benchmarks, such as maintaining up-to-date audited accounts or demonstrating an increase in tax collection. This mechanism promotes accountability and incentivizes local governments to improve their overall operational efficiency and transparency.
Q27. The following question consists of two statements, Assertion (A) and Reason (R). Answer the question using the options given below.
Assertion (A): Performance grants are designed to incentivize local bodies to improve their revenue collection and maintain audited accounts.
Reason (R): Performance grants are distributed equally among all Panchayats regardless of their financial management practices.
Assertion (A): Performance grants are designed to incentivize local bodies to improve their revenue collection and maintain audited accounts.
Reason (R): Performance grants are distributed equally among all Panchayats regardless of their financial management practices.
Explanation
Performance grants are specifically designed to incentivize local bodies to improve their financial management, such as maintaining audited accounts and increasing tax revenue. These grants are not distributed equally; they are earned based on meeting specific reform benchmarks. This targeted approach ensures that only those local bodies demonstrating improved efficiency and accountability receive additional financial support, encouraging better governance across all units.
Q28. Which of the following is a major challenge associated with the fiscal devolution framework to local bodies?
Explanation
A major challenge in the fiscal framework is the heavy reliance on tied grants, which are earmarked for specific central or state schemes. This dependency limits the ability of local bodies to prioritize projects based on immediate local needs. While these grants ensure funding for national priorities, they can undermine the functional autonomy of local governments and restrict their capacity for decentralized planning.
Q29. Arrange the following stages of the fiscal devolution process in the correct logical sequence:
I. Actual transfer of devolved funds to local bodies
II. Constitution of the State Finance Commission
III. Laying of the Action Taken Report before the State Legislature
IV. Determination of the divisible pool of state taxes by SFC
Which of the following is the correct sequence?
I. Actual transfer of devolved funds to local bodies
II. Constitution of the State Finance Commission
III. Laying of the Action Taken Report before the State Legislature
IV. Determination of the divisible pool of state taxes by SFC
Which of the following is the correct sequence?
Explanation
The fiscal devolution process begins with the constitution of the State Finance Commission by the Governor. The commission then determines the divisible pool and distribution formulas. After submitting its report, the state government presents an Action Taken Report to the legislature. Finally, the actual transfer of funds occurs based on the accepted recommendations, completing the cycle of financial resource allocation to local bodies.
Q30. In the context of 15th Finance Commission recommendations, the distribution of grants between Rural and Urban local bodies is generally based on:
Explanation
The 15th Finance Commission generally recommends distributing grants between rural and urban local bodies based on their relative population sizes. Some weightage is also given to the geographic area to account for the varying costs of service delivery in different regions. This demographic and spatial approach ensures that resources are allocated in proportion to the number of citizens served and the physical challenges involved.Answer key for these questions
| Q | Correct answer |
|---|---|
| 21 | (d) The Local Fund Audit Department |
| 22 | (a) Fiscal stress and delayed delivery of civic services |
| 23 | (a) A-i, B-ii, C-iii, D-iv |
| 24 | (a) Assigning higher weightage to backwardness and per capita income distance in the horizontal devolution formula |
| 25 | (a) I and II |
| 26 | (c) Incentive-based transfers tied to reforms like audited accounts or improved tax collection efficiency |
| 27 | (c) A is true but R is false. |
| 28 | (a) Over-dependence on tied grants limiting local prioritization and autonomy |
| 29 | (a) II, IV, III, I |
| 30 | (a) Ratio of rural and urban population with some weightage for area |
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.