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Difficulty: HardFiscal Policy, Union/State Budgeting, Public Finance, and Taxation Structure

Consider the following statements regarding the mechanism of fiscal transfers and grants-in-aid under the Indian Constitution:

1. Statutory grants under Article 275 are awarded on the recommendations of the Finance Commission and are charged directly upon the Consolidated Fund of India.
2. Discretionary grants under Article 282 permit both the Union and the States to make financial grants for any public purpose, outside the obligatory recommendations of the Finance Commission.
3. Special capital and revenue grants provided to states for promoting the welfare of Scheduled Tribes or raising the administration level of Scheduled Areas are governed under Article 282.

Which of the statements given above are correct?

  1. 1 and 2 onlyAnswer
  2. B
    2 and 3 only
  3. C
    1 and 3 only
  4. D
    1, 2, and 3

Answer

Statements 1 and 2 are correct, while Statement 3 is incorrect.
The correct response identifies that Statements 1 and 2 accurately describe Constitutional fiscal provisions. Statutory grants under Article 275 are non-tax transfers recommended by the Finance Commission and charged to the Consolidated Fund of India. Discretionary grants under Article 282 allow policy-driven transfers for any public purpose. Statement 3 misidentifies tribal welfare grants, which are constitutionally anchored in the proviso of Article 275(1).

Step-by-Step Solution

1
Analyze Statement 1 regarding Article 275
Statement 1 is correct.
Article 275 empowers Parliament to make grants-in-aid to states in need of assistance on the recommendation of the Finance Commission. These statutory grants are charged on the Consolidated Fund of India.
2
Analyze Statement 2 regarding Article 282
Statement 2 is correct.
Article 282 is a miscellaneous financial provision enabling both the Union and States to allocate grants for any public purpose, regardless of whether that purpose falls within their legislative jurisdiction. These lie outside the Finance Commission statutory devolution framework.
3
Analyze Statement 3 regarding Tribal Area Grants
Statement 3 is incorrect.
Grants for schemes promoting the welfare of Scheduled Tribes or raising the level of administration of Scheduled Areas in a state are specifically provided under the second proviso to Article 275(1), making them statutory grants under Article 275, not discretionary grants under Article 282.

Key Concept

Constitutional provisions governing statutory grants (Article 275) versus discretionary public purpose grants (Article 282) in Indian public finance.
Estimated Time:1m 30s
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Topics

Fiscal Policy, Union/State Budgeting, Public Finance, and Taxation Structure