Question

Write one limitation of federal finance system in india

Answer 1

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Truly speaking, the fiscal arrangement of any country is largely governed by the political system of the country concerned.

India’s po­litical structure is federal; so its financial sys­tem is also federal in character.

The essence of the federal form of government is that each government (Central, Union Territories and State governments) and local-self government is independent of each other with constitution­ally demarcated functions. What is needed is that each government should have independ­ent sources of revenue and should have com­mand over resources to meet its needs.

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Answer 2

Less financial autonomy to the states.

Less financial autonomy to the states is one of the limitation of federal fiance system in India. The GST and all other revenue generation fields are being controlled by the centre and the states depend upon the mercy of centre. That is why states demand more and more financial autonomy.