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    Question

    The horizontal devolution of tax revenues among Indian

    states considers which of the following?
    A Efficiency and effectiveness of states Correct Answer Incorrect Answer
    B Equity and historical precedence Correct Answer Incorrect Answer
    C Tax buoyancy only Correct Answer Incorrect Answer
    D Central grants and loans Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    • Vertical devolution refers to the share of central tax revenues distributed to states as a whole (e.g., 41% as per the 15th Finance Commission). • Horizontal devolution refers to how this share is divided among states based on criteria like income distance, population, area, forest cover, tax effort, and importantly, efficiency and demographic performance.

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