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 31–40 of 59 questions
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q31. Match the following terms in List I with their meaning in List II:
Term
Meaning
A. Terms of Reference
i. The fund from which grants-in-aid are given to local bodies
B. Divisible Pool
ii. The scope and guidelines within which the SFC must operate
C. Consolidated Fund of State
iii. Government’s response to the SFC’s recommendations
D. Action Taken Report
iv. The total state tax revenue available for sharing
Explanation
Fiscal devolution involves several key components. The Terms of Reference guide the commission’s scope, while the Divisible Pool represents the state tax revenue available for sharing. Grants-in-aid are disbursed from the Consolidated Fund of the State to support local needs. Finally, the Action Taken Report details the government’s response to the commission’s recommendations, ensuring legislative oversight of the entire devolution process.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q32. The First State Finance Commission of Rajasthan recommended the allocation of what percentage of the state’s net tax revenue to local bodies?
Explanation
The First State Finance Commission of Rajasthan, established after the constitutional amendments, recommended that 2.18% of the state’s net tax revenue be allocated to local bodies. This specific percentage marked the beginning of formal, formula-based fiscal transfers in the state. It aimed to provide a steady and predictable source of income for both Panchayati Raj Institutions and Urban Local Bodies.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q33. Consider the following statements regarding the evolution of the devolution framework in Rajasthan: Statement I: Successive State Finance Commissions have gradually increased the percentage share of local bodies in the state’s divisible pool. Statement II: The criteria for horizontal distribution have evolved to include elements like performance and financial management. Which of the above statement(s) is/are correct?
Explanation
Over time, successive State Finance Commissions in Rajasthan have generally recommended a higher percentage of state revenue for local bodies to reflect their growing responsibilities. Additionally, the criteria for horizontal distribution have become more sophisticated, incorporating performance metrics and financial management reforms. These changes aim to balance the need for increased funding with the objective of promoting efficient and accountable local self-governance.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q34. Consider the following statements about the rules governing the State Finance Commission: I. The Governor constitutes the State Finance Commission every five years or earlier. II. The Legislature of a State may by law determine the requisite qualifications for its members. III. The recommendations of the SFC are legally binding on the State Government. IV. The SFC submits its report directly to the President of India. Which of the above statement(s) is/are correct?
Explanation
The Governor is constitutionally required to constitute the State Finance Commission every five years. The state legislature determines the qualifications and selection process for its members by law. While the commission’s recommendations carry significant weight, they are advisory rather than legally binding. Furthermore, the SFC submits its report to the Governor for presentation to the state legislature, not directly to the President.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q35. What is the standard periodicity for the constitution of a State Finance Commission as per the Constitution of India?
Explanation
According to the Constitution of India, the State Finance Commission must be constituted every five years. This periodic establishment ensures that the financial health of local bodies is reviewed regularly and that devolution formulas are updated to reflect changing economic conditions. The Governor of each state is responsible for initiating this process, which is essential for maintaining the financial stability of local self-government institutions.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q36. Consider the following functions and identify which ones are performed by the State Finance Commission: I. Reviewing the financial position of Panchayats II. Recommending the distribution of net proceeds of state taxes III. Determining the principles for grants-in-aid to municipalities IV. Suggesting measures to improve the financial position of local bodies V. Conducting the daily financial audit of Zila Parishads Which of the above statement(s) is/are correct?
Explanation
The State Finance Commission reviews the finances of Panchayats, recommends the distribution of net State tax proceeds, sets principles for grants-in-aid to municipalities and suggests ways to improve local body finances. It does not do the daily audit of Zila Parishads, so V is wrong.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q37. Which of the following defines the "Divisible Pool" in state-local fiscal relations?
Explanation
The divisible pool refers to the total amount of state-collected tax revenue that the State Finance Commission considers for distribution to local bodies. This pool typically includes various state taxes, duties, and tolls after deducting collection costs. It forms the base from which the vertical devolution percentage is calculated, ensuring that local governments receive a share of the state’s primary financial resources.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q38. When recommending horizontal devolution among individual local bodies, State Finance Commissions use various criteria. Which of the following is a generally accepted criterion?
Explanation
When recommending horizontal devolution, State Finance Commissions use objective criteria such as population and geographic area. Population reflects the demand for services, while area accounts for the costs associated with serving sparse regions. These factors ensure that funds are distributed based on actual needs and physical challenges rather than political affiliations or proximity to administrative centers, promoting equity among all local government units.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q39. Match the following devolution weightage criteria in List I with their primary rationale in List II: List I: (Devolution Weightage Criteria) A. Population B. Area C. Income distance/Backwardness D. Tax effort/Performance List II: (Primary Rationale) i. Ensures equity by providing more to poorer areas ii. Addresses the scale of service delivery required iii. Incentivizes better own source revenue collection iv. Compensates for higher costs of service provision in sparse regions
Explanation
Devolution criteria serve specific goals. Population reflects the scale of service delivery needs, while area compensates for the higher costs of providing amenities in vast, sparsely populated regions. Income distance ensures equity by providing more support to backward areas. Finally, tax effort or performance metrics incentivize local bodies to improve their own revenue collection, balancing the need for support with the goal of fiscal responsibility.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q40. Grants-in-aid recommended by the State Finance Commission are disbursed from the:
Explanation
Grants-in-aid and devolved tax shares recommended by the State Finance Commission are disbursed from the Consolidated Fund of the State. This fund contains all revenues received by the state government, including taxes and loans. The constitutional framework ensures that transfers to local bodies are made through this primary treasury, providing a formal and legal channel for the flow of financial resources to local governments.
Answer key for these questions
Q
Correct answer
31
(a) A-ii, B-iv, C-i, D-iii
32
(a) 2.18%
33
(c) Both Statement I and Statement II
34
(a) I and II
35
(c) Every 5 years
36
(b) I, II, III and IV
37
(d) The portion of the state’s own tax revenue that is eligible for sharing with local bodies
38
(b) The demographic profile and geographic area of the local body
39
(a) A-ii, B-iv, C-i, D-iii
40
(d) Consolidated Fund of the State
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.
