Consider the following: 1. Demographic performance 2. Forest and ecolo

Consider the following:
1. Demographic performance
2. Forest and ecology
3. Governance reforms
4. Stable government
5. Tax and fiscal efforts
For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population area and income distance?

Only two
Only three
Only four
All five
This question was previously asked in
UPSC IAS – 2023
The Fifteenth Finance Commission (FC-XV) used several criteria for horizontal tax devolution (distribution of the divisible pool of central taxes among the states). The criteria used were:
1. **Population (2011):** 15% weight
2. **Area:** 15% weight
3. **Forest and Ecology:** 10% weight
4. **Income Distance:** 45% weight
5. **Demographic Performance:** 12.5% weight
6. **Tax and Fiscal Efforts:** 2.5% weight

The question asks for the number of criteria from the given list used by the FC-XV, *other than* population, area, and income distance.
Let’s examine the provided list against the FC-XV criteria:
1. Demographic performance: Yes, used (12.5%).
2. Forest and ecology: Yes, used (10%).
3. Governance reforms: No, not a quantitative criterion used for horizontal devolution. While good governance is important and discussed in reports, it was not a formula-based criterion for distributing funds to states.
4. Stable government: No, this is a political condition, not an economic or demographic criterion used by the Finance Commission for devolution.
5. Tax and fiscal efforts: Yes, used (2.5%).

The criteria from the list, other than population, area, and income distance, that were used by the Fifteenth Finance Commission are: Demographic performance, Forest and ecology, and Tax and fiscal efforts. This is a total of three criteria.

– The Fifteenth Finance Commission used multiple criteria for horizontal tax devolution among states.
– Population, Area, and Income Distance were significant criteria.
– Other criteria included Demographic Performance, Forest and Ecology, and Tax and Fiscal Efforts.
– Governance reforms and Stable government were not formula-based criteria for horizontal devolution.
The weights assigned to each criterion reflect the Commission’s judgment on how to balance equity, need, and performance among states. Using the 2011 population census data instead of 1971 data (used by previous commissions) was a significant change, and the Demographic Performance criterion was introduced partly to address concerns of states that had successfully controlled population growth. Forest and Ecology and Tax and Fiscal Efforts were included to incentivize positive outcomes in these areas.