Answer: (A)
Vertical devolution refers to the sharing of central taxes between the Centre and the
States.
• The 16th Finance Commission (FC) has retained the States’ share at 41%, the same
level recommended by the 15th Finance Commission.
• This means 41% of the divisible pool of central taxes (like income tax, GST, excise,
etc.) will be transferred to States, while 59% remains with the Centre.OFFICERS IAS ACADEMY
IAS ACADEMY RUN BY FORMER CIVIL SERVANTS
• Retaining 41% reflects a balance between States’ demand for higher resources
(many demanded ~50%) and the Centre’s increased expenditure responsibilities,
including national security, infrastructure, and servicing debt.
• This continuity supports predictability and stability in fiscal federalism.
• Hence, statement 1 is correct.
Horizontal devolution deals with how the States’ share (41%) is distributed among
individual States.
The 16th Finance Commission has introduced a new criterion: “Contribution to GDP” in
the horizontal devolution formula.
Purpose of this criterion:
• To recognise and reward States that contribute more to the national economy.
• To address concerns of economically advanced States that earlier formulas focused
heavily on redistribution and equity alone.
• To incentivise economic growth, productivity, and fiscal discipline.
This marks a shift towards a balance between equity (supporting poorer States) and
efficiency/performance (rewarding growth-oriented States). Hence, statement 2 is
correct.
The population criterion under the 16th Finance Commission is based on the 2011
Census, not the 1971 Census.
Earlier Finance Commissions used 1971 Census data to avoid penalising States that
successfully controlled population growth.
However, recent Finance Commissions (including the 15th and 16th FCs) have shifted to the
2011 Census to reflect:
• Current demographic realities
• Actual expenditure needs related to health, education, housing, and infrastructure.
To address fairness concerns, the Commission also uses a separate criterion like demographic
performance to reward States that performed well in population control. Hence, statement 3
is incorrect.

Consider the following statements regarding the Fiscal Responsibility and Budget Management
(FRBM) framework:
1. The FRBM Act, enacted in 2003, provides a statutory framework to ensure fiscal
discipline in India.
2. The 3 % of GSDP borrowing limit on States is enforced under Article 293 of the
Constitution.
3. In the 2026-27 Budget, the Centre aims to maintain a fiscal deficit of 4.3% of GDP and
a debt-to-GDP ratio of 55.6% under the FRBM Act.

Answer: (D)
Statement 1 is correct: The FRBM Bill was introduced in 2000 and later enacted as the
FRBM Act in 2003, providing a statutory framework to ensure fiscal discipline and
accountability in government finances.
Statement 2 is correct: Article 293 empowers the Centre to regulate State borrowings and
impose conditions when States have outstanding loans, which underpins the enforcement of
the 3 % of GSDP borrowing cap and curbing of off-budget borrowings.
Statement 3 is correct: For BE 2026-27, the Central Government has set a fiscal deficit target
of 4.3 % of GDP and aims to maintain the debt-to-GDP ratio at 55.6 %, while also reporting any
deviations from these targets to Parliament to ensure transparency.

Consider the following regarding the Union Budget 2026-2027.
1. Biopharma SHAKTI scheme
2. Dedicated Chemical Parks
3. National Fibre scheme
4. Mahatma Gandhi Gram Swaraj Initiative

Biopharma SHAKTI (Strategy for Healthcare Advancement through Knowledge,
Technology and Innovation) scheme is a new flagship initiative announced in Budget
2026–27 with an outlay of ₹10,000 crore over five years. It aims to build a
comprehensive ecosystem for biopharmaceutical manufacturing — covering research,
production, clinical development, and regulatory support — with the goal of making
India a global biopharma hub.
• Dedicated Chemical Parks scheme was announced in the Union Budget 2026–27,
introducing direct budgetary support for the first time for dedicated chemical park
infrastructure. Under this initiative, the government will support states in establishingOFFICERS IAS ACADEMY
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three dedicated chemical parks using a challenge-based, cluster-driven
plug-and-play model, aimed at fostering industrial clusters with ready infrastructure
and fast-track execution.
• National Fibre Scheme was first announced in the Union Budget 2026–27 as part of a
new integrated programme for the textile sector to promote self-reliance in natural
fibres (like silk, wool, jute) as well as man-made and new-age fibres. It was introduced
in February 2026 during the presentation of the Budget by the Finance Minister.
• Mahatma Gandhi Gram Swaraj Initiative was introduced in the Union Budget 2026–
27, and hence its starting year is 2026. It was announced by the Finance Minister
during the Budget speech on 1 February 2026 with the aim of strengthening khadi,
handloom and handicraft sectors and reinforcing village-level self-reliance as envisioned
in Gandhi’s Gram Swaraj philosophy.

Consider the following statements regarding the Gyan Bharatam Mission:
1. It aims to preserve and digitise India’s ancient manuscripts and make them accessible
through a national digital repository.
2. It is implemented under the Ministry of Information and Broadcasting.

1)Answer: (A)
The Gyan Bharatam Mission is a Government of India initiative under the Ministry of
Culture aimed at surveying, preserving, and digitising India’s ancient manuscripts. It
seeks to create a national digital repository to make traditional knowledge accessible to
scholars and the public. The mission helps safeguard India’s cultural heritage and promotes
research in Indian Knowledge Systems. Hence, statement 1 is only correct and hence, the
correct answer is option (a).

With reference to India’s satellite launch vehicles, consider the following statements:
1. PSLVs are mainly used for launching satellites meant for Earth resources
monitoring, whereas GSLVs are primarily used to launch communication satellites.
2. PSLV is primarily used for low Earth and polar orbits, whereas GSLV launches
heavier satellites into geosynchronous transfer orbit

Answer: (A)
● PSLV (Polar Satellite Launch Vehicle) is mainly used for launching Earth observation
/ remote sensing / resource monitoring satellites into polar and sun-
synchronous orbits.
● GSLV (Geosynchronous Satellite Launch Vehicle) is primarily designed to launch
communication satellites, which need to be placed in geosynchronous orbits.
Hence, statement 1 is correct.
● PSLV is well suited for Low Earth Orbit (LEO) and polar orbits.
● GSLV can launch heavier payloads into Geosynchronous Transfer Orbit (GTO)
because it uses a cryogenic upper stage, which provides higher efficiency and thrust.
Hence, statement 2 is correct.

Consider the following statement regarding Wetlands conservation
1. 2. National Plan for Conservation of Aquatic Ecosystems is a centrally sponsored scheme
aimed to conserve wetlands under the Ministry of Jal Shakthi.
West Bengal leads in the number of Ramsar sites in India.
3. Under the Amrit Dharohar scheme, the Management of Effectiveness Tracking Tool
(METT) is used to assess and manage India’s Ramsar sites.

Answer A
Statement 1 is Incorrect: The National Plan for Conservation of Aquatic Ecosystems (NPCA)
is a centrally sponsored scheme implemented by the Ministry of Environment forest and
climate change on a Centre–State cost-sharing basis for conservation and management of
wetlands. It aims at holistic restoration, including water quality improvement,
biodiversity conservation, and mainstreaming wetlands into developmental planning
through integrated management plans, capacity building, and research.
Statement 2 is incorrect: Tamil Nadu currently leads India with the highest number of
Ramsar sites, not West Bengal. Tamil Nadu has 20 sites (Highest in India).Statement 3 is correct: The Management Effectiveness Tracking Tool (METT) has been
officially institutionalized as the "report card" for the Amrit Dharohar scheme to ensure that
India’s 98 Ramsar sites are managed with high standards. The tool used today is an Indian-
adapted version (often called R-METT) launched by the MoEFCC. It features:
● Rapid Assessment: A questionnaire-based approach that can be completed quickly
without expensive consultants.
● Standardized Scoring: It uses a 0–3 scale across 34 specific parameters to provide a
"Management Effectiveness Score."

With reference to the recommendations of the 16th Finance Commission, consider the following
statements:
1. 2. 3. The grant allocation for local bodies is proposed to be split in the ratio of 60% for rural
local bodies and 40% for urban local bodies.
The urbanisation premium recommended by the Commission aims to encourage the
conversion of rural areas with urban characteristics into Urban Local Bodies (ULBs).
ULBs must have an elected council, audited accounts and notified property tax floor
rates to receive 16th Finance Commission grants.

Statement 1 is correct. The 16th Finance Commission has proposed that the total grants
allocated to local bodies during the period 2026–31 should be divided in the ratio of 60% for
rural local bodies and 40% for urban local bodies. This split reflects the Commission’s
attempt to balance the needs of rural decentralisation with the growing financial requirements
of urban governance.
Statement 2 is correct.The Commission has introduced an urbanisation premium to
address delays in granting statutory urban status to areas that already display urban
characteristics. This premium is intended to incentivise states to facilitate the transition of
peri-urban and census towns from rural local bodies to Urban Local Bodies (ULBs),
thereby enabling more appropriate urban planning and service delivery.
Statement 3 is correct.
To be eligible for 16th Finance Commission grants, ULBs must meet specific performance and
governance conditions:
● They must have an elected council
● Maintain audited accounts
● Implement notified property tax floor rates
This conditionality links grants to good governance, fiscal accountability, and
revenue mobilisation

Consider the following statements regarding Securities Transaction Tax (STT):
1. 2. It is an indirect tax levied on the purchase and sale of securities traded on a
recognized stock exchange in India.
The tax is calculated based on the net profit or capital gains realized by the investor
at the end of the financial year.