The correct answer is: a) Allocating resources between the state and local bodies.
The State Finance Commission (SFC) is a body constituted by the state government to recommend principles for the devolution of financial resources to local bodies. The SFC takes into account the needs of local bodies, the state’s fiscal position, and the recommendations of the Central Finance Commission. The SFC’s recommendations are binding on the state government.
The SFC plays an important role in ensuring that local bodies have adequate resources to provide essential services to the people. The SFC’s recommendations have helped to improve the financial position of local bodies and have led to an improvement in the quality of services provided by local bodies.
The other options are incorrect because:
- Option b) Tax policy is determined by the state government. The SFC does not have any role in tax policy.
- Option c) Budget preparation is the responsibility of the state government. The SFC does not have any role in budget preparation.
- Option d) Debt management is the responsibility of the state government. The SFC does not have any role in debt management.