The correct answer is: Only III is implicit.
The statement says that the Central Government has directed the State Governments to reduce government expenditure. It also says that the Central Government may not be able to sanction any additional grant to the states for the next six months.
Assumption I: The State Governments are totally dependent on Central Government for its expenditures.
This assumption is not implicit in the statement. The statement only says that the Central Government has directed the State Governments to reduce government expenditure. It does not say that the State Governments are totally dependent on the Central Government for their expenditures.
Assumption II: The Central Government has reviewed the expenditure account of the State Government.
This assumption is also not implicit in the statement. The statement only says that the Central Government has directed the State Governments to reduce government expenditure. It does not say that the Central Government has reviewed the expenditure account of the State Government.
Assumption III: The State Governments will abide by the directive.
This assumption is implicit in the statement. The statement says that the Central Government has directed the State Governments to reduce government expenditure. This implies that the Central Government expects the State Governments to abide by its directive.
Therefore, the correct answer is: Only III is implicit.