Which of the following statements with regard to recommendations of the 15th Finance Commission of India are correct? I. It has recommended grants of ₹4,800 crores from the year 2022-23 to the year 2025-26 for incentivizing States to enhance educational outcomes. II. 45% of the net proceeds of Union taxes are to be shared with States. III. ₹45,000 crores are to be kept as performance-based incentive for all States for carrying out agricultural reforms. IV. It reintroduced tax effort criteria to reward fiscal performance. Select the correct answer using the code given below.
- (a) I, II and III
- (b) I, II and IV
- (c) I, III and IV ✓ UPSC's answer
- (d) II, III and IV
Why the answer is (c)
• The 15th Finance Commission (chair N.K. Singh) reported for 2021–26; its award shapes Centre–State fiscal relations for that period.
• Statement I is correct: it recommended ₹4,800 crore over 2022–23 to 2025–26 as performance grants to incentivise States to improve educational outcomes.
• Statement III is correct: it earmarked ₹45,000 crore as performance-based incentives for States that implement agricultural reforms (land leasing, agricultural marketing, contract farming and related laws).
• Statement IV is correct: it reintroduced a 'tax and fiscal efforts' criterion with a weight of 2.5% in the horizontal devolution formula to reward fiscal performance.
• Statement II is wrong: the vertical devolution recommended was 41% of the divisible pool, not 45% (reduced from 42% after Jammu & Kashmir became a Union Territory); hence I, III and IV, option (c).
Why the other options are wrong
- (a) I, II and III
- Statement II is wrong: devolution is 41%, not 45%.
- (b) I, II and IV
- Statement II is wrong; statement III on agricultural incentives is correct.
- (d) II, III and IV
- Statement II is wrong; statement I on education grants is correct.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2025, held on 25 May 2025. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.