All Courses
Explore Courses UPSC Exam UPSC Test Series Free Notes EduRev Infinity Get the App Login Join for Free
Sign in Open App
Banking Exams Exam  >  Banking Exams Questions  >  In India, federal financial assistance to sta... Start Learning for Free
SaveJoin the Discussion on the App
In India, federal financial assistance to states is given on the basis of
  • a)
    The tax effort of the states
  • b)
    The revenue collection of the states
  • c)
    Population, tax effort and special problems of the states
  • d)
    The demands of the states
Correct answer is option 'C'. Can you explain this answer?
FREE This question is part of
Download PDF Attempt Test
Download PDF Attempt this Test
Most Upvoted Answer
In India, federal financial assistance to states is given on the basis...
The Answer:

In India, federal financial assistance to states is given on the basis of population, tax effort, and special problems of the states. This approach ensures a fair distribution of resources and helps in addressing regional disparities and promoting balanced development across the country.

Population:
Population is an important factor in determining the financial assistance given to states. States with higher populations typically require more resources to cater to the needs of their residents. Therefore, a portion of the financial assistance is allocated based on the population of each state. This helps in ensuring that states with larger populations receive adequate support to provide essential services and infrastructure.

Tax Effort:
The tax effort of the states is another crucial criterion for determining financial assistance. The tax effort refers to the revenue generated by the states through their own taxation efforts. States that exhibit higher tax efforts by effectively implementing tax policies and generating substantial revenue are rewarded with additional financial assistance. This approach encourages states to enhance their tax collection mechanisms and promotes fiscal discipline.

Special Problems:
Financial assistance is also provided to states based on their special problems or specific needs. Some states face unique challenges such as backwardness, lack of infrastructure, or geographical disadvantages. To address these issues and promote inclusive growth, additional funds are allocated to such states. This ensures that states with specific problems receive extra support to overcome their challenges and accelerate development.

Conclusion:
The distribution of federal financial assistance to states in India is based on a comprehensive approach that considers the population, tax effort, and special problems of each state. This approach aims to achieve equitable development, reduce regional disparities, and foster balanced growth across the country. By allocating resources in a fair and targeted manner, the government can support states in addressing their specific needs and promoting overall socio-economic progress.
< Previous Question Next Question >
Explore Courses for Banking Exams exam

Similar Banking Exams Doubts

Read the following passage carefully and answer the questions given below it.The default of Infrastructure Leasing & Financial Services (IL&FS) on several of its debt obligations over the last couple of months has raised serious questions about how regulators missed the growing debt pile of a systemically important financial institution. But apart from the obvious failure of regulators to do their jobs, the IL&FS saga has also exposed the underlying weaknesses in the non-banking financial company (NBFC) sector as a whole which has depended heavily on low-cost, short-term debt financing to sustain its shaky business model. As both international and domestic interest rates continue to rise, the stocks of NBFCs have been punished as investors expect the profit margins of these companies to come under pressure as their borrowing costs rise.Then there is the further, and more serious, risk of NBFCs being unable to roll over their short-term debt in case of a severe credit crunch in the aftermath of the IL&FS saga. Both these factors have combined to put an end to the dream run of NBFCs, which have enjoyed high valuations amidst rapidly growing profits over the last few years. The precipitous crash of shares of Dewan Housing Finance Ltd. has been the defining moment of the present crisis. It is worth noting that the rise of NBFCs was fuelled primarily by the demise of traditional banks which have been unable to lend as they were bogged down by non-performing loans. Meanwhile, NBFCs with strong pricing power, which can somehow successfully achieve the transfer of higher borrowing rates to their own borrowers, may still survive rising interest rates.The response of policymakers to the ongoing crisis, which seems warranted if its purpose is to prevent a wider systemic crisis, is fraught with other risks. The Reserve Bank of India, the National Housing Bank and the State Bank of India last week decided to increase the supply of liquidity in the market to keep interest rates under control. The RBI has also urged NBFCs to make use of equity rather than debt to finance their operations. This is apart from the government’s decision to replace IL&FS’s management and commitment to providing the company with sufficient liquidity. While offering easy money may be a welcome measure in the midst of the ongoing liquidity crisis, the prolonged supply of low-cost funds to the NBFC sector also creates the risk of building an unsustainable bubble in various sectors of the economy.Defaults associated with any such bubbles will eventually only affect the loan books of lenders. State bailouts could also fuel the problem of moral hazard as other financial institutions may expect a similar lifeline in the future. Policymakers should thus try to focus on taking steps to address structural problems that contributed to the crisis. This includes steps necessary to widen the borrower base of NBFCs that have been banned from accepting deposits. This would allow NBFCs to tap into more reliable sources of funding and avoid similar liquidity crisis in the future.Q.According to the author, how have the regulators missed the growing debt pile of a systemically important financial institution?I. The regulators failed to do their jobsII. Low cost debt financingIII. Short term debt financing

Directions: Read the passage and answer the question carefully.The government that assumes office after the general election will have to crack a serious and unresolved problem: India's banking sector. [A] To do so, it needs clarity on how the problem arose in the first place. Only then can it discard simplistic and ideologically-driven solutions in favour of those that can be effective.Non-performing assets (NPAs) at commercial banks amounted to ₹10.3 trillion, or 11.2% of advances, in March 2018. Public sector banks (PSBs) accounted for ₹8.9 trillion, or 86%, of the total NPAs. The ratio of gross NPA to advances in PSBs was 14.6%. These are levels typically associated with a banking crisis. In 2007-08, NPAs totalled ₹566 billion (a little over half a trillion), or 2.26% of gross advances. The increase in NPAs since then has been staggering. How did this come about?The answer lies partly in the credit boom of the years 2004-05 to 2008-09. In that period, commercial credit (or what is called 'non-food credit') doubled. It was a period in which the world economy as well as the Indian economy were booming. Indian firms borrowed furiously in order to avail of the growth opportunities they saw coming. Most of the investment went into infrastructure and related areas — telecom, power, roads, aviation, steel. [B] Businessmen were overcome with exuberance, partly rational and partly irrational. They believed, as many others did, that India had entered an era of 9% growth.Thereafter, as the Economic Survey of 2016-17 notes, many things began to go wrong. Thanks to problems in acquiring land and getting environmental clearances, several projects got stalled. Their costs soared. At the same time, with the onset of the global financial crisis in 2007-08 and the slowdown in growth after 2011-12, revenues fell well short of forecasts. Financing costs rose as policy rates were tightened in India in response to the crisis. The depreciation of the rupee meant higher outflows for companies that had borrowed in foreign currency. This combination of adverse factors made it difficult for companies to service their loans to Indian banks.The year 2014-15 marked a watershed. The Reserve Bank of India (RBI), acting in the belief that NPAs were being under-stated, introduced tougher norms for NPA recognition under an Asset Quality Review. NPAs in 2015-16 almost doubled over the previous year as a result. [C] It is not as if bad decisions had suddenly happened. It's just that the cumulative bad decisions of the past were now coming to be more accurately captured.Higher NPAs mean higher provisions on the part of banks. Provisions rose to a level where banks, especially PSBs, started making losses. Their capital got eroded as a result. Capital from the government was slow in coming and it was barely adequate to meet regulatory norms for minimum capital. Without adequate capital, bank credit cannot grow. Even as the numerator in the ratio of gross NPAs/advances rose sharply, growth in the denominator fell. Both these movements caused the ratio to shoot up to a crisis level. Once NPAs happen, it is important to effect to resolve them quickly. Otherwise, the interest on dues causes NPAs to rise relentlessly.This, in brief, is the story of the NPA problem. Since the problem is more concentrated in PSBs, some have argued that public ownership must be the problem. Public ownership of banks, according to them, is beset with corruption and incompetence (reflected in poor appraisal of credit risk). The solution, therefore, is to privatise the PSBs, at least the weaker ones.There are problems with this formulation. There are wide variations within each ownership category. In 2018, the State Bank of India's (SBI's) gross NPA/gross advances ratio was 10.9%. This was not much higher than that of the second largest private bank, ICICI Bank, 9.9%. The ratio at a foreign bank, Standard Chartered Bank, 11.7%, was higher than that of SBI. [D] Moreover, private and foreign banks were part of consortia that are now exposed to some of the largest NPAs.What can be inferred from [A] 'To do so, it needs clarity on how the problem arose in the first place'?

Top Courses for Banking ExamsView all

Top Courses for Banking Exams

In India, federal financial assistance to states is given on the basis ofa)The tax effort of the statesb)The revenue collection of the statesc)Population, tax effort and special problems of the statesd)The demands of the statesCorrect answer is option 'C'. Can you explain this answer?
Question Description
In India, federal financial assistance to states is given on the basis ofa)The tax effort of the statesb)The revenue collection of the statesc)Population, tax effort and special problems of the statesd)The demands of the statesCorrect answer is option 'C'. Can you explain this answer? for Banking Exams 2024 is part of Banking Exams preparation. The Question and answers have been prepared according to the Banking Exams exam syllabus. Information about In India, federal financial assistance to states is given on the basis ofa)The tax effort of the statesb)The revenue collection of the statesc)Population, tax effort and special problems of the statesd)The demands of the statesCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Banking Exams 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In India, federal financial assistance to states is given on the basis ofa)The tax effort of the statesb)The revenue collection of the statesc)Population, tax effort and special problems of the statesd)The demands of the statesCorrect answer is option 'C'. Can you explain this answer?.
Solutions for In India, federal financial assistance to states is given on the basis ofa)The tax effort of the statesb)The revenue collection of the statesc)Population, tax effort and special problems of the statesd)The demands of the statesCorrect answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for Banking Exams. Download more important topics, notes, lectures and mock test series for Banking Exams Exam by signing up for free.
Here you can find the meaning of In India, federal financial assistance to states is given on the basis ofa)The tax effort of the statesb)The revenue collection of the statesc)Population, tax effort and special problems of the statesd)The demands of the statesCorrect answer is option 'C'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of In India, federal financial assistance to states is given on the basis ofa)The tax effort of the statesb)The revenue collection of the statesc)Population, tax effort and special problems of the statesd)The demands of the statesCorrect answer is option 'C'. Can you explain this answer?, a detailed solution for In India, federal financial assistance to states is given on the basis ofa)The tax effort of the statesb)The revenue collection of the statesc)Population, tax effort and special problems of the statesd)The demands of the statesCorrect answer is option 'C'. Can you explain this answer? has been provided alongside types of In India, federal financial assistance to states is given on the basis ofa)The tax effort of the statesb)The revenue collection of the statesc)Population, tax effort and special problems of the statesd)The demands of the statesCorrect answer is option 'C'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice In India, federal financial assistance to states is given on the basis ofa)The tax effort of the statesb)The revenue collection of the statesc)Population, tax effort and special problems of the statesd)The demands of the statesCorrect answer is option 'C'. Can you explain this answer? tests, examples and also practice Banking Exams tests.
Explore Courses for Banking Exams exam

Top Courses for Banking Exams

Explore Courses

Suggested Free Tests

Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev
Get App
© EduRev
Education Revolution
Follow Us
Signup to see your scores go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup