Which of the following is the biggest item of grants-in-aid to the states assigned by the Fifteenth Finance Commission?

Correct option is C

Correct Option: (c) ​Local bodies grants

Explanation:

• The Fifteenth Finance Commission (XV FC), covering the period 2021-26, recommended total grants-in-aid amounting to approximately ₹10.33 lakh crore.
• Among the components of these grants, Local Bodies Grants form the largest share. The specific breakdown of the recommended grants is as follows:
  • Local Bodies Grants: ₹4,36,361 crore (Highest).
  • Revenue Deficit Grants: ₹2,94,514 crore.
  • Sector-Specific Grants: ₹1,29,987 crore.
  • Disaster Risk Management Grants: ₹1,22,601 crore.
• The commission emphasized strengthening grassroots democracy and service delivery, leading to the substantial allocation for local bodies.

Information Booster:

• Chairman: The 15th Finance Commission was chaired by N.K. Singh.

• Vertical Devolution: The commission recommended a 41% share of the divisible pool of taxes for states (adjusted from 42% in the 14th FC due to the reorganization of J&K into UTs).

• Local Body Split: The grants for local bodies are divided between Rural and Urban local bodies in a ratio of approximately 67:33.

• Types of LB Grants: These are further categorized into Basic (Untied) Grants (can be used for location-specific needs like salary payment) and Tied Grants (earmarked for sanitation, water supply, etc.)