With reference to the 16th Finance Commission (FC) and its recommendations, consider the following statements regarding which are incorrect:
- The Finance Commission is a quasi-judicial body whose recommendations regarding the distribution of net proceeds of taxes are legally binding on the Union Government.
- The Commission has introduced 'contribution to GDP' as a criterion for horizontal devolution, replacing the earlier tax and fiscal effort parameter.
- Revenue deficit grants, sector-specific grants and state-specific grants have been continued to ensure the fiscal stability of weaker states.
Which of the statements given above are incorrect?
Correct answer: C
Explanation
The Finance Commission is a quasi-judicial body, but its recommendations are advisory and not legally binding on the Union, so statement 1 is incorrect. The 16th FC did discontinue revenue deficit, sector-specific and state-specific grants rather than continuing them, so statement 3 is incorrect. Statement 2 about adding 'contribution to GDP' for horizontal devolution is true, so the incorrect statements are 1 and 3.