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 41–50 of 59 questions
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q41. Consider the following statements regarding the own source revenue of Panchayats: Statement I: It includes revenues generated from property tax, vehicle tax, and fees on markets. Statement II: A robust own source revenue base reduces the fiscal dependency of Panchayats on the State Government. Which of the above statement(s) is/are correct?
Explanation
Panchayats can generate their own revenue through various local taxes and fees, such as property tax and market charges. A strong own-source revenue base is vital because it reduces dependence on state transfers and enhances functional autonomy. When local bodies raise their own funds, they gain more flexibility in spending and become more accountable to their residents for the quality of local services.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q42. Consider the following challenges faced by Urban Local Bodies in generating own source revenue: I. Outdated property valuation methods II. High compliance costs and complex administrative procedures III. Abundance of untied state grants reducing the incentive to tax Which of the above statement(s) is/are correct?
Explanation
Urban Local Bodies face multiple challenges in raising revenue, including outdated property valuation methods and complex administrative procedures that increase compliance costs. Additionally, the abundance of untied grants can sometimes reduce the motivation for local bodies to rigorously collect taxes. Addressing these issues through modernization and policy reform is essential for improving the financial self-sufficiency and overall efficiency of urban governance systems.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q43. Which of the following is an example of an "untied grant" usage by a local body?
Explanation
An untied grant is characterized by its flexibility, allowing local bodies to use funds for projects determined by local needs. Constructing a village library based on a community resolution is a classic example of using untied funds for local priorities. In contrast, spending on specific national schemes like sanitation or water missions often involves tied grants, which must be used according to strict guidelines.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q44. The following question consists of two statements, Assertion (A) and Reason (R). Answer the question using the options given below. Assertion (A): Untied grants enhance the functional autonomy of local self-governments. Reason (R): Untied grants compel local bodies to spend funds strictly according to the schematic guidelines set by the Central Government.
Explanation
Untied grants are specifically intended to enhance the functional autonomy of local bodies by providing them with discretionary spending power. They do not compel local bodies to follow strict central schematic guidelines; instead, they allow for flexible spending based on locally identified priorities.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q45. Which of the following measures represents the best approach for capacity building of local bodies in financial management?
Explanation
Regular training of officials in double-entry accounting and modern e-governance tools is the best way to build the financial management capacity of local bodies.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q46. Select the correct sequence of financial flow from the State Government down to the lowest tier of the Panchayati Raj Institutions for devolved funds:
Explanation
In the traditional financial flow of devolved funds, resources move from the state government through the hierarchical tiers of the Panchayati Raj system. Funds are typically first released to the Zila Parishad at the district level, then to the Panchayat Samiti at the block level, and finally reach the Gram Panchayat. This structured flow ensures administrative oversight and coordination across all three levels of rural governance.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q47. Consider the following statements regarding the First State Finance Commission of Rajasthan: I. It was constituted in the year 1995. II. Its term covered the period 1995-2000. III. K.K. Goyal was its Chairman. IV. It recommended transferring 2.18% of state net tax revenue to local bodies. V. It completely ignored urban local bodies in its devolution. Which of the above statement(s) is/are correct?
Explanation
The First State Finance Commission of Rajasthan was constituted in 1995 under the chairmanship of K.K. Goyal for the period 1995-2000. It recommended the transfer of 2.18% of the state’s net tax revenue to local bodies. Crucially, the commission’s mandate included both rural and urban local bodies, setting the precedent for inclusive fiscal devolution that supports the entire spectrum of local self-government institutions in the state.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q48. Under the provisions of the Panchayati Raj Act in Rajasthan, who authorizes the Panchayats to levy, collect, and appropriate taxes, duties, tolls, and fees?
Explanation
The authority for Panchayats to levy, collect, and manage taxes, duties, and fees is derived from laws enacted by the State Legislature. While the Constitution provides the framework for local self-governance, it is the state-specific legislation that defines the exact scope of these taxing powers. This ensures that local revenue generation is conducted within a clear legal structure that specifies the types and limits of authorized local levies.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q49. Which statement correctly describes the evolution of the devolution framework in Rajasthan over successive SFCs?
Explanation
The evolution of fiscal devolution in Rajasthan is marked by a significant shift toward more structured financial relations. Earlier ad-hoc grants have been replaced by a system where local bodies receive a predefined percentage share of the state’s divisible tax pool. This formula-based approach provides local governments with greater financial predictability and stability, allowing for more effective long-term planning and better delivery of essential civic services to the residents.
RAS PrelimsRajasthan Economy · State Finance Commission and Fiscal Devolution in Rajasthan
Q50. Match the following Rajasthan State Finance Commissions in List I with their respective constitution years in List II:
Rajasthan State Finance Commission
Constitution Year
A. First SFC
i. 1995
B. Second SFC
ii. 1999
C. Fourth SFC
iii. 2011
D. Sixth SFC
iv. 2021
Explanation
The Rajasthan State Finance Commission has been constituted at regular intervals to review local finances. The first was established in 1995, followed by the second in 1999.
Answer key for these questions
Q
Correct answer
41
(c) Both Statement I and Statement II
42
(d) I, II and III
43
(b) Constructing a village library based on a resolution passed by the Gram Sabha
44
(c) A is true but R is false.
45
(c) Regular training for officials on double- entry accounting systems and modern e-governance tools
46
(b) State Government Zila Parishad Panchayat Samiti Gram Panchayat
47
(b) I, II, III and IV
48
(a) The State Legislature by law
49
(b) A shift from an ad-hoc grant system to a formula-based percentage share of the state tax pool.
50
(a) A-i, B-ii, C-iii, D-iv
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.
