Consider the following statements regarding the state of states rsquo finances in India The Finance ...........

Economic Affairs Public Finance and Debt Management

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Consider the following statements regarding the state of states’ finances in India

The Finance Commission, an independent constitutional body, determines the criteria for revenue sharing between states and the Centre.
Aggregating across all states, more than one-third of the states’ total revenue came from central government transfers in past five years.

Select the correct statement.

1 only

2 only

Both

None

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Explanation:

The Constitution under Article 280 provides for periodic creation of Finance Commission to make recommendations to the president about the distribution of the net proceeds of taxes between the Union and States and also the allocation of the same among the States themselves.
During the 2015-20 period, 53% of revenue receipts of states has come from own sources and 47% from central transfers. According to budget estimates for 2019-20, aggregating across all states, 52.5% of the states’ total revenue was to be generated on their own, while 47.5% came via central transfers. Hence both statements are correct.