economics medium True/False

The 'Income Distance' criterion used by the Finance Commission to distribute funds among states favors richer, more industrialized states over poorer, less developed states.

  1. True
  2. False

Answer: False

The Income Distance criterion is designed to promote equity and reduce regional disparities. It measures the distance of a state's per capita income from the state with the highest per capita income. Therefore, poorer states with a larger 'distance' receive a higher weightage and a larger share of funds to help them catch up with the richer states.

Topic Public Finance - Fiscal Federalism
Exam Relevance UPSC Prelims, SSC CGL
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