The correct option is "1 only." The Fourteenth Finance Commission, which was established to review and recommend the distribution of tax revenues between the Centre and the States, indeed increased the States' share in the central divisible pool of taxes from 32% to 42%. This marked a significant shift aimed at empowering States financially and promoting fiscal decentralization. While the Commission did address fiscal issues and recommended measures for equitable distribution, it did not focus specifically on sector-specific grants in a manner that was as pronounced as previous commissions, hence option 2 is incorrect. This shift is crucial for understanding the broader goals of federalism and resource allocation within India's financial framework.