Q.2 What are the issues facing fiscal federalism in India? How do these issues affect the states’ role in addressing the socio-economic inequalities? (10 Marks)

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https://www.thehindu.com/opinion/lead/the-poor-state-of-indias-fiscal-federalism/article65690849.ece
In the intro, mention the role of the Finance Commission in fiscal transfers in India.
In the body mention the issues with the fiscal federalism such as politicisation of Finance Commission, loss of autonomy due to Centrally Sponsored Schemes, use of cess by central government proceeds of which are not shared with the states, reduction in corporate taxes, higher interest rates than centre etc.
Conclude by mentioning the need for addressing the issues and recognising the important role of the states reducing the socio-economic inequalities.

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