Fiscal Aspects of Federalism:Critiqal Appraisal of Relationship between Centre and States

The term federal has been derived from the Latin term 'foedus' which means treaty or agreement. Such treaty or agreement follows the merger of a number of separate states into a single sovereign State. The objective of agreement is to arrive at a compromise, among the interests of the central authority which comes into being as a result of merger of the states on the one hand and the various states which are transformed into constituent units of that political structure on the other hand.