economics hard MCQ

In the context of Indian fiscal federalism, what does the term 'Horizontal Devolution' refer to?

  1. The sharing of tax revenues between the Central Government and the State Governments
  2. The distribution of the states' share of taxes among the individual States themselves
  3. The transfer of funds from the Consolidated Fund to the Contingency Fund
  4. The borrowing of funds by the Centre from the international bond market

Answer: The distribution of the states' share of taxes among the individual States themselves

Vertical devolution determines the total percentage of the divisible tax pool that goes to the States as a whole (e.g., 41% as per the 15th FC). Horizontal devolution is the complex formula used to divide that aggregate state share *among* the various states, using criteria like population, forest cover, demographic performance, and income distance to ensure equity.

Topic Public Finance - Fiscal Federalism
Exam Relevance UPSC Prelims, SSC CGL
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