I am not sure since how long this method of fund sourcing by state governments is in effect. But in past couple of years what we saw was absurd, and definitely an unethical approach. Mamata Banerjee government has successfully bagged many packages from Union Government against her support in parliament and elsewhere, still looking greedy and raising new her demand. In recent development, Akhilesh Yadav led UP Government may raise a heavy package from center on for loyal behavior of Samajwadi Party during Presidential nomination. Another news is from my own state Bihar, where JDU has supported UPA and Pranab Mukharjee and forwarded a bill like a service/consultancy provider company.

These facts says, to get genuine help and financial support from center government either state should have government from center governed party, or arm twisting power, or bargaining capacity. Do you find such system justified enough in a democratic country? All money in the system is of it's citizen not of any political party or government executives so why it's distribution is entirely dependent on the willingness of the central government? Our federal system of governance is not playing like a real federal govt. at least in case of fund distribution to relatively poorer states.