Indian Polity · Polity and Governance
With reference to the evolution of India's fiscal federal architecture under the 16th Finance Commission, which of the following statements best articulates the conceptual balancing of 'equity' with 'efficiency'?
- 1It represents a structural modernization that dilutes the historical reliance on purely need-based transfers by lowering the weight of the primary redistribution parameter, yet deliberately preserves its dominance to ensure growth incentives do not trigger severe redistribution shocks.✓
- 2It completely abandons historical redistribution mechanisms by eliminating the income distance criterion, enforcing a strict performance-linked model where state allocations are determined exclusively by their GDP contribution.
- 3It ensures continuity in intergovernmental transfers by increasing reliance on need-based parameters, systematically raising the weightage of demographic performance and area.
- 4It dynamically adjusts the states' overall share in the divisible pool above the historical 41% baseline to actively reward high-performing states, thereby prioritizing efficiency over equity.
Correct answer
It represents a structural modernization that dilutes the historical reliance on purely need-based transfers by lowering the weight of the primary redistribution parameter, yet deliberately preserves its dominance to ensure growth incentives do not trigger severe redistribution shocks.
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