Which constitutional body is responsible for recommending principles for the allocation of grants-in-aid to states from the Consolidated Fund of India?

The correct answer is Finance Commission.

Key Points

• The Finance Commission is a constitutional body established under Article 280 of the Indian Constitution.
• It is tasked with recommending principles for the distribution of financial resources between the Union and the States.
• The Finance Commission also suggests the allocation of grants-in-aid to the states from the Consolidated Fund of India to supplement their revenues.
• The President of India appoints the Finance Commission every five years, or at such earlier times as deemed necessary.
• It consists of a Chairman and four other members, who are appointed as per the qualifications mentioned in the Constitution.
• The Finance Commission plays a critical role in maintaining fiscal federalism in India by ensuring equitable distribution of financial resources.
• Its recommendations cover areas such as tax revenue sharing, principles for governing grants-in-aid, and measures to improve the financial position of local bodies.

 Additional Information

• Planning Commission
  • The Planning Commission was an institution in the Government of India that formulated India’s Five-Year Plans for economic development.
  • It was established in 1950 but was later replaced by the NITI Aayog in 2015.
  • The Planning Commission was primarily focused on long-term strategic planning and was not responsible for the allocation of grants-in-aid to states.
• NITI Aayog
  • The NITI Aayog (National Institution for Transforming India) replaced the Planning Commission in 2015.
  • It is a policy think tank of the Government of India, focusing on providing strategic and technical advice to both the Union and State governments.
  • Unlike the Finance Commission, NITI Aayog does not deal with the allocation of financial resources or grants-in-aid.
• National Development Council (NDC)
  • The National Development Council, established in 1952, was an advisory body under the Planning Commission.
  • It comprised the Prime Minister, Union Ministers, Chief Ministers of States, and members of the Planning Commission.
  • The NDC was responsible for approving the Five-Year Plans and reviewing development policies, but it did not handle grants-in-aid distribution.