Principles of federal finance - problems of resource allocation between centre and states, fiscal relations between centre and state, finance commissions, federal finance in India, local finance in India - sources, functions, growth, structure and defects - One Line Questions

1. Which constitutional amendment significantly impacted local finance in India by providing a framework for urban and rural local bodies? — 74th Amendment
2. The Finance Commission in India is a constitutional body established under which Article of the Constitution? — Article 280
3. The structure of federal finance in India aims to balance: — National unity and regional autonomy.
4. The 'Fourteenth Finance Commission' emphasized: — A significant increase in the states' share of the divisible pool.
5. Fiscal decentralization refers to: — Transferring financial powers and responsibilities to lower levels of government.
6. Which of the following taxes is typically part of the divisible pool in India? — Personal Income Tax
7. Which of the following is a source of revenue for Panchayati Raj Institutions (PRIs)? — Assignment of land revenue and property taxes
8. Which of the following is a significant source of revenue for State Governments in India? — Sales Tax/Value Added Tax (VAT)/GST
9. Which of the following is a significant expenditure responsibility of the State Governments in India? — Law and Order
10. Functions of local government bodies typically include: — Public health, sanitation, and local infrastructure development.
11. Which of the following is NOT typically a recommendation made by the Finance Commission? — Monetary policy rates.
12. The 'Twelfth Finance Commission' was chaired by whom? — Dr. C. Rangarajan
13. The 'conditionalities' attached to grants from the centre to states often relate to: — Ensuring fiscal discipline and alignment with national priorities.
14. A major challenge for Indian states in managing their finances is: — High levels of debt and fiscal deficits.
15. Which of the following is a key principle of resource allocation between the centre and states in a federal system? — Assignment of revenue sources based on administrative efficiency and equity.
16. Discretionary grants are typically provided by the: — Central Government on the recommendation of NITI Aayog
17. The NITI Aayog replaced the: — Planning Commission
18. Fiscal federalism in India has seen a shift towards: — Empowerment of states through GST and more untied funds.
19. The principle of 'subsidiarity' in public finance suggests that: — Functions should be performed at the lowest possible level of government.
20. The Fiscal Responsibility and Budget Management (FRBM) Act aims to: — Impose fiscal discipline on the central and state governments.
21. The introduction of the Goods and Services Tax (GST) in India aimed to: — Create a unified national market for indirect taxation.
22. Which of the following is a potential problem of fiscal federalism in India? — Lack of coordination between centre and states on economic policies.
23. A common defect in local finance in India is: — Limited tax bases and narrow revenue sources.
24. Which of the following is a major source of revenue for the Central Government in India? — Corporation Tax
25. The recommendations of the Finance Commission are: — Advisory in nature, but generally accepted by the government.
26. The structure of local finance in India includes: — A mix of own-source revenues and grants from state governments.
27. A key defect in the federal finance system of India has been: — Insufficient coordination between different levels of government.
28. A significant challenge for local finance in India is: — Over-reliance on central government grants.
29. A major problem in resource allocation between the centre and states often relates to: — Overlapping tax jurisdictions.
30. The growth of local finance in India has been hampered by: — Lack of functional autonomy and financial dependence.
31. Grants-in-aid provided by the centre to states can be of two main types: — Conditional grants and unconditional grants.
32. Statutory grants are recommended by the: — Finance Commission
33. The 'Finance Commission' and 'NITI Aayog' play distinct but complementary roles in: — Determining the fiscal relationship between the Centre, States, and Local Bodies.
34. While the Finance Commission deals with non-plan transfers, the Planning Commission (erstwhile) and now NITI Aayog were/are involved in: — Plan grants and developmental funding
35. The 73rd and 74th Constitutional Amendments aimed to: — Decentralize fiscal powers to local self-governing institutions.
36. Local finance in India is often characterized by: — Dependence on state government grants and limited own-source revenue.
37. In India, the concept of 'divisible pool' of taxes refers to: — Taxes levied and collected by the centre but the net proceeds are shared between the centre and states.
38. The 'revenue deficit grants' recommended by recent Finance Commissions are intended to address: — The gap between the revenue receipts and revenue expenditure of states.
39. The concept of 'compensatory federalism' in India relates to: — The centre compensating states for revenue losses due to policy changes.
40. The 'devolution' of funds from the centre to states by the Finance Commission means: — Sharing a portion of central taxes with the states.
41. Vertical fiscal imbalance in federal finance refers to: — The imbalance in revenue-raising capacities between the centre and states.
42. Horizontal fiscal imbalance refers to: — The imbalance in revenue-raising capacities and expenditure needs among different states.
43. The Finance Commission's recommendations on grants-in-aid are generally based on: — The revenue and expenditure needs of the states.
44. Fiscal relations between the centre and state in India are primarily governed by: — The recommendations of the Finance Commission.
45. What is the primary goal of federal finance? — To achieve an equitable distribution of financial resources and responsibilities between different levels of government.
46. What is the primary function of the Finance Commission? — To advise on the distribution of net proceeds of taxes between the Union and the States.
47. A defect in the structure of local finance in India is: — Lack of clarity in the division of powers between different tiers of local government.
48. The entry of Finance in the Constitution of India is listed in the: — Union List
49. The 'Fifteenth Finance Commission' was chaired by: — N. K. Singh
All One Line Questions
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