With reference to the Fourteenth Finance Commission, which of the following statements is/are correct?
1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent
2. It has made recommendations concerning sector-specific grants
Select the correct Answer using the code given below:

The correct option is 1 only.

Let us analyze the statements step-by-step to understand why this is the correct answer:

1. Analysis of Statement 1:
The Fourteenth Finance Commission (headed by Y. V. Reddy) recommended a major shift in center-state fiscal relations. It recommended increasing the share of states in the net proceeds of the shareable central taxes (the central divisible pool) from 32 percent (which was recommended by the Thirteenth Finance Commission) to 42 percent. This was a significant increase of 10 percentage points, aimed at giving states greater fiscal autonomy to design and implement schemes as per their local needs. Therefore, Statement 1 is correct.

2. Analysis of Statement 2:
Unlike its predecessors, the Fourteenth Finance Commission did not make any recommendations concerning sector-specific or state-specific grants. Instead, it focused on enhancing unconditional fiscal transfers (devolution through tax shares) and recommended only broad-based local body grants and disaster management grants, alongside post-devolution revenue deficit grants where applicable. By avoiding sector-specific grants, the commission aimed to reduce the discretionary element in central transfers and give states the freedom to spend according to their own priorities. Therefore, Statement 2 is incorrect.

Since only the first statement is correct, the correct answer is indeed "1 only".