economics hard True/False

In the horizontal devolution formula recommended by the 15th Finance Commission, the 'Income Distance' criterion is assigned the highest weightage to ensure that poorer, less developed states receive a proportionately larger share of central taxes.

  1. True
  2. False

Answer: True

The 15th Finance Commission assigned a massive 45% weightage to the 'Income Distance' criterion (the gap between a state's per capita GSDP and that of the richest state). This heavily progressive weighting ensures that states with lower fiscal capacity and higher developmental needs (like Bihar or UP) receive significantly more funds per capita than wealthier, industrialized states (like Maharashtra or Tamil Nadu), promoting national equity and balanced regional growth.

Topic Public Finance - Institutions
Exam Relevance UPSC Prelims, SSC CGL
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