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Which of the following best describes the concept of fiscal federalism in the Indian constitutional framework?

Fiscal federalism in India is the constitutional distribution of taxing and spending powers between the Central Government and State Governments. This allows both levels of government to raise revenue and implement spending programmes within their assigned areas, ensuring balanced development across the nation.

  1. AThe ability of the Central Government to override all State Government financial decisions
  2. BThe distribution of taxing and spending powers between the Central Government and State GovernmentsCorrect
  3. CThe process by which the Reserve Bank of India controls monetary policy across all states
  4. DThe mandatory transfer of all tax revenue from States to the Centre for redistribution

Explanation

Fiscal federalism refers to the institutional and structural arrangements through which the Centre and States share fiscal responsibilities, taxing powers and spending authority. It is a core principle of India's federal structure. The other options misrepresent this concept—the Centre cannot override all State decisions, RBI is separate from fiscal federalism, and revenue is not wholly transferred before redistribution.

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