Correct Option
The Finance Commission is a constitutional body established under Article 280 of the Indian Constitution. Its primary functions include:
- Recommending the distribution of net proceeds of taxes between the Union and the States.
- Determining the principles governing grants-in-aid to the States by the Union from the Consolidated Fund of India.
- Suggesting measures needed to augment the Consolidated Fund of a State to supplement the resources of Panchayats and Municipalities in the State.
The Commission's mandate is focused on fiscal federalism and resource distribution between the Union and State governments, as well as local bodies. It does not deal with the inflow of foreign capital, the distribution of finances among Public Sector Undertakings, or ensuring transparency in financial administration, which fall under the purview of other government departments and constitutional bodies.
Incorrect Options
Option (a): The Finance Commission's role does not extend to encouraging the inflow of foreign capital for infrastructure development. This function typically falls under the domain of government ministries and departments responsible for economic affairs, investment promotion (e.g., Department for Promotion of Industry and Internal Trade - DPIIT), and foreign policy.
Option (b): The Finance Commission is not involved in facilitating the proper distribution of finances among Public Sector Undertakings (PSUs). Financial decisions concerning PSUs, including their funding and resource allocation, are primarily managed by the respective administrative ministries, the Union Cabinet, and bodies like NITI Aayog, based on government policy and budgetary allocations.
Option (c): Ensuring transparency in financial administration is a broad function primarily overseen by institutions such as the Comptroller and Auditor General of India (CAG), parliamentary committees, and established budgetary and accounting procedures. The Finance Commission's role is advisory regarding resource distribution, not an oversight body for financial transparency.