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CS Professional · CSR and Social Governance · Local Self Governance

A State Legislature enacts a law on Panchayat finances. A Panchayat in the State complains that the Finance Commission constituted under Article 243I was never set up, though the State government says it will set one up after ten years. Which statement is correct?

The State must constitute a Finance Commission every fifth year. Article 243I required the first within one year of the amendment's commencement and then one at the expiry of every fifth year, so a plan to wait ten years contravenes the constitutional requirement.

  1. AThe State Finance Commission must be constituted within one year from the commencement of the 73rd Amendment and thereafter at the expiry of every fifth yearCorrect
  2. BThe State Finance Commission is constituted only when the Governor feels necessary, with no fixed interval
  3. CThe State Finance Commission must be constituted every tenth year
  4. DOnly the Union Finance Commission reviews Panchayat finances and no State body is needed

Explanation

Article 243I requires the Governor to constitute a Finance Commission within one year of the Amendment and thereafter at the expiry of every fifth year to review Panchayat finances. A ten-year gap therefore violates the mandate. Discretionary or tenth-year timing is wrong, and the Union Commission only recommends measures to supplement State resources.

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