Center- State Financial relations in INDIA
Financial relations are the most important aspect of Centre-State relations. No system of federation can be successful unless both the Union and the States have at their disposal adequate financial resources to enable them to discharge their respective responsibilities under the Constitution. To achieve this object, Indian Constitution has made elaborate provisions, relating to the distribution of the taxes as well as non-tax revenues and the power of borrowing, supplemented by provisions for grants-in-aid by the Union to the States. It is to be noted that Indian Constitution makes a distinction between the legislative power to levy a tax and power to appropriate the proceeds of a tax so levied. The legislative power to make a law for imposing a tax is divided as between the Union and States by means of specific Entries in the Union and State Legislative Lists in Schedule VIII. Thus, while the State's Legislative has the power to levy an estate duty in respect of agricultur