The Fourteenth Finance Commission assigned different weights to the fo

The Fourteenth Finance Commission assigned different weights to the following parameters for distribution of tax proceeds to the States :

1. Income distance
2. Population
3. Demographic changes
4. Area

Arrange the aforesaid parameters in descending order in terms of their weights.

1-2-3-4

1-2-4-3

1-3-2-4

4-3-2-1

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This question was previously asked in

UPSC CDS-2 – 2018

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The correct answer is A.

The Fourteenth Finance Commission (FFC) used the following criteria and weights for horizontal distribution of tax proceeds among states: Income Distance (50%), Population (2011) (27.5%), Demographic Change (17.5%), Area (15%), and Forest Cover (7.5%). Arranging the parameters given in the question (Income distance, Population, Demographic changes, Area) in descending order of their weights: Income Distance (50%) > Population (27.5%) > Demographic changes (17.5%) > Area (15%). This corresponds to the order 1-2-3-4.

The FFC notably increased the weight given to Income Distance and introduced Demographic Change (reflecting efforts towards population control) as a criterion, while also increasing the share of central taxes devolved to states to 42%. The use of the 2011 population data, instead of 1971 data used by previous commissions, also significantly altered the distribution.

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