Explanation:

Vertical and horizontal imbalances are common features of most federations. The Constitution assigned taxes with a nation-wide base to the Union to make the country one common economic space unhindered by internal barriers to the extent possible. States being closer to people and more sensitive to the local needs have been assigned functional responsibilities involving expenditure disproportionate to their assigned sources of revenue resulting in vertical imbalances. The devolution of taxes from the centre helps them fulfil these responsibilities