Although India's federal polity provides for divided governmental functions and powers, imbalances have arisen between the functional responsibilities and financial resources of the central and state governments. This is because revenue-raising capacities of the states are lower than their revenue needs. The mismatch between functions and financial powers has occurred partly because of increasing responsibilities of the states and partly due to the dominant position of the central government in regard to taxation and debt-raising powers. Therefore, vertical imbalances of resources and expenditure responsibilities have emerged between the central and state governments, calling for a transfer of resources from the center to the states. Financial imbalances at the vertical level (center vs. states) and at the horizontal level (among the states) need to be removed/reduced through constitutional and institutional arrangements. This book provides an in-depth analysis of the magnitude and manner of fiscal transfers from the center to the states in India, including a case study of Uttar Pradesh, India's most populous state.