UPSC Prelims Practice Questions — ‘Coalition governments gave India opportunities to reform its federal structure’

Q1. With reference to the recommendations of the 16th Finance Commission tabled along with the Union Budget 2026–27, consider the following. Which of the above is/are correctly identified?

  1. The States' share in the divisible pool of central taxes has been retained at 41%.
  2. Revenue deficit grants to States have been discontinued.
  3. A new weight of 10% has been assigned to a State's contribution to GDP in horizontal devolution.
  4. The vertical share of States has been raised to 50% of the divisible pool.
  • A. 1 and 2 only
  • B. 2 and 4 only
  • C. 1, 2 and 3
  • D. 1, 3 and 4

Q2. Consider the following statements comparing the 16th Finance Commission award (2026–31) with the 15th Finance Commission award (2021–26). Which of the statements given above is/are correct?

  1. The vertical share of States in the divisible pool of central taxes is identical under both awards.
  2. The 'tax and fiscal effort' criterion used by the 15th FC has been dropped by the 16th FC in horizontal devolution.
  3. The 16th FC has shifted the population reference from the 1971 Census used by the 15th FC to the 2011 Census.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q3. As per the 16th Finance Commission's recommendations, what is the total quantum of grants allocated to rural and urban local bodies for the award period 2026–27 to 2030–31?

  • A. About ₹4.36 lakh crore
  • B. About ₹7.91 lakh crore
  • C. About ₹10.40 lakh crore
  • D. About ₹15.50 lakh crore

Q4. In the context of the 16th Finance Commission's report on Centre-State fiscal relations, the term 'grand bargain' refers to which one of the following?

  • A. An arrangement under which States accept a marginally smaller percentage share of a larger divisible pool created by merging most cesses and surcharges into shareable central taxes
  • B. A one-time settlement of all pending GST compensation dues to States in exchange for States forgoing the constitutional right to levy any new cess
  • C. A joint Centre-State borrowing window operated under the FRBM framework to fund capital expenditure on national infrastructure
  • D. The replacement of all Centrally Sponsored Schemes with a single unconditional block grant routed through the State Consolidated Fund
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