Economics · Fiscal Federalism

Which of the following statements regarding fiscal federalism in India is CORRECT?

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1The Finance Commission serves to increase fiscal imbalances among States
2Vertical fiscal imbalance arises due to a mismatch between revenue-raising powers and expenditure responsibilities✓
3The Centre has higher direct public spending responsibilities than all States combined
4States have greater revenue-raising powers than the Centre

Correct answer

Vertical fiscal imbalance arises due to a mismatch between revenue-raising powers and expenditure responsibilities

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