With reference to the Finance Commission of India, which of the following statements is correct?
Answer & explanation
Answer: (d) None of the statements (a), (b) and (c) given above is correct in this context
The Finance Commission is a constitutional body under Article 280. It makes recommendations to the President on how the net proceeds of shareable taxes are distributed between the Union and the States, and on how they are allocated among the States. It also recommends the principles governing grants-in-aid to States. Attracting foreign capital, distributing funds among PSUs and ensuring transparency in financial administration are not part of its mandate, so (d) is correct.
- ✗ (a) Encouraging foreign capital inflow is a matter of government investment policy. It is not among the Finance Commission's functions under Article 280.
- ✗ (b) The Commission deals with the division of tax proceeds between the Union and the States, and with allocation among the States. It does not distribute finances among Public Sector Undertakings.
- ✗ (c) Ensuring transparency in financial administration is not part of the Commission's Article 280 mandate. Audit of government accounts is the role of the Comptroller and Auditor General.
- ✓ (d) Statements (a), (b) and (c) are all incorrect, so this is the right choice.
Remember · The Finance Commission (Article 280) is constituted at the expiration of every fifth year, or earlier if the President considers it necessary. It recommends the Union–State sharing of tax proceeds and grants-in-aid to States, not PSU funding or foreign capital.
Sources
- Finance Commission of India – Terms of Reference of the Sixteenth Finance Commission ↗ “The distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under Chapter I, Part XII of the Constitution”
Question: UPSC Civil Services (Preliminary) 2011, General Studies Paper I. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). ·
