Consider the following : 1. Demographic performance 2. Forest and ecology 3. Governance reforms 4. Stable government 5. Tax and fiscal efforts For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population area and income distance?

(a) Only two
(b) Only three ✓ UPSC's answer
(c) Only four
(d) All five

Why the answer is (b)

• The 15th Finance Commission's horizontal devolution formula (2021–26) uses six criteria: income distance (45%), population 2011 (15%), area (15%), forest and ecology (10%), demographic performance (12.5%) and tax and fiscal efforts (2.5%).

• Excluding population, area and income distance leaves three of the listed items: demographic performance, forest and ecology, and tax and fiscal efforts (items 1, 2 and 5).

• Demographic performance rewards States that controlled population growth, offsetting the switch from the 1971 to the 2011 census.

• 'Governance reforms' and 'stable government' are not devolution criteria (items 3 and 4).

• Hence three, option (b).

Why the other options are wrong

(a) Only two: Three criteria (demographic performance, forest and ecology, tax effort) apply, not two.
(c) Only four: Governance reforms is not a criterion, so the count is three.
(d) All five: Governance reforms and stable government are not devolution criteria.

Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2023, held on 28 May 2023. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.