Which one of the following criteria got the highest weight for determi

Which one of the following criteria got the highest weight for determination of shares of States in the formula given by the 14th Finance Commission?

[amp_mcq option1=”Population” option2=”Income distance” option3=”Area” option4=”Tax effort” correct=”option2″]

This question was previously asked in

UPSC CDS-2 – 2017

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The question asks which criterion received the highest weight in the formula used by the 14th Finance Commission for determining the shares of states in the divisible pool of central taxes.

– The 14th Finance Commission used specific criteria for horizontal devolution (distribution of central taxes among states).
– The weights assigned were: Income Distance (50%), Population (2011) (27.5%), Area (15%), Forest Cover (7.5%). (Note: Some sources give slightly different distributions or include a component for demographic performance, but Income Distance consistently receives the highest weight).
– Among the options provided (Population, Income distance, Area, Tax effort), Income Distance had the highest weight (50%). Tax effort was a criterion used by some previous Finance Commissions, but not the 14th FC.

Income distance measures the distance of a state’s per capita income from the state with the highest per capita income. A higher income distance indicates a lower per capita income, and states with higher income distance typically receive a larger share of the divisible pool to address regional inequalities.

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