The correct answer is: a) Central government grants and transfers.
Central government grants and transfers are the largest source of revenue for the Arunachal Pradesh government. In 2020-21, these grants and transfers accounted for 64% of the state’s total revenue. The main types of central government grants and transfers to Arunachal Pradesh are:
- Plan grants: These are grants given by the central government to the state government for specific development projects.
- Non-plan grants: These are grants given by the central government to the state government for general purposes, such as meeting the state’s administrative expenses.
- Loans: The central government also gives loans to the state government, which are used to finance development projects.
The main reason why central government grants and transfers are the largest source of revenue for the Arunachal Pradesh government is that the state has a small economy and a low tax base. The state’s economy is based on agriculture, forestry, and tourism, and these sectors do not generate much tax revenue. The state’s tax base is also low because the state has a small population and a high proportion of people living in rural areas.
The central government grants and transfers are important for the Arunachal Pradesh government because they help to finance the state’s development projects and meet its administrative expenses. The grants and transfers also help to reduce the state’s fiscal deficit.
The other options are incorrect because they are not the largest source of revenue for the Arunachal Pradesh government.
- Income tax is a tax on income earned by individuals and businesses. It is collected by the central government and is not a major source of revenue for the Arunachal Pradesh government.
- Property tax is a tax on the value of real estate. It is collected by the state government and is not a major source of revenue for the Arunachal Pradesh government.
- Export duties are taxes on goods that are exported from a country. They are collected by the central government and are not a major source of revenue for the Arunachal Pradesh government.