Question

One of the main objectives of an SFC's recommendations is to bridge the fiscal gap between the assigned functions of local bodies and their available financial resources. This is known as:

• A. Vertical imbalance
• B. Horizontal imbalance
• C. Both A and B
• D. None of the above

Answer 1

Answer:

C. Both A and B

• A vertical imbalance exists when the revenues of a government tier (e.g., local bodies) do not match their expenditure responsibilities.

• A horizontal imbalance exists when there are disparities in fiscal capacity among different local bodies at the same level.

• SFCs aim to correct both.