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Consider the following statements:
1. The Constitution of India empowers the Indian Parliament to give grants to the states based on the recommendation of the Finance Commission.
2. Grants recommended by the Finance Commission are voted upon during the annual budget.
Which of the statements given above is/are not correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements:1. The Constitution of India empower...
Article 275 empowers the Parliament to make grants to the states which are in need of financial assistance and not to every state. Also, different sums may be fixed for different states. These sums are charged on the Consolidated Fund of India every year. The statutory grants under Article 275 (both general and specific) are given to the states on the recommendation of the Finance Commission.  So, Statement 1 is not correct.
Such sums as Parliament may by law provide shall be charged on the Consolidated Fund of India in each year as grants in aid of the revenues of such States as Parliament may determine to be in need of assistance, and different sums may be fixed for different States. These sums may not be a part budget.  So, Statement 2 is not correct.
ADDITIONAL INFORMATION:
Besides sharing of taxes between the Centre and the states, the Constitution provides for grants-inaid to the states from the Central resources. There are two types of grants-in-aid, viz, statutory grants and discretionary grants:
Statutory Grants Article 275 empowers the Parliament to make grants to the states which are in need of financial assistance and not to every state. Also, different sums may be fixed for different states. These sums are charged on the Consolidated Fund of India every year. Apart from this general provision, the Constitution also provides for specific grants for promoting the welfare of the scheduled tribes in a state or for raising the level of administration of the scheduled areas in a state including the State of Assam.
The statutory grants under Article 275 (both general and specific) are given to the states on the recommendation of the Finance Commission.
Discretionary Grants Article 282 empowers both the Centre and the states to make any grants for any public purpose, even if it is not within their respective legislative competence. Under this provision, the Centre makes grants to the states. “These grants are also known as discretionary grants, the reason being that the Centre is under no obligation to give these grants and the matter lies within its discretion. These grants have a two-fold purpose: to help the state financially to fulfil plan targets; and to give some leverage to the Centre to influence and coordinate state action to effectuate the national plan." 
Notably, the discretionary grants form the larger part of the Central grants to the states (when compared with that of the statutory grants).
Other Grants The Constitution also provided for a third type of grants-inaid, but for a temporary period. Thus, a provision was made for grants in lieu of export duties on jute and jute products to the States of Assam, Bihar, Orissa and west Bengal. These grants were to be given for a period of ten years from the commencement of the Constitution. These sums were charged on the Consolidated Fund of India and were made to the states on the recommendation of the Finance Commission.
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Consider the following statements:1. The Constitution of India empowers the Indian Parliament to give grants to the states based on the recommendation of the Finance Commission.2. Grants recommended by the Finance Commission are voted upon during the annual budget.Which of the statements given above is/are not correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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