Comprehension Passage

Read the passage below and answer the question:

The government of India's fiscal policy response to the covid crises comprised of a judicious mix of increasing food and fertilizer subsidies on the one hand and a reduction in taxes on fuel and certain imported products on the other. Despite these additional fiscal pressures the union govt. is back on track. The resilience in the fiscal performance of the union government has been facilitated by the recovery in economic activity buoyancy in revenues from direct taxes and goods and services tax (GST) and realistic assumptions in the budget. The gross tax revenue registered a YoY growth of 15.5% from April to November 2022, driven by robust growth in the direct taxes and GST. The gross GST-collection has increased at 24.8% on YoY during the same period. The Union Government's emphasis on capital expediture (capex) has continued despite higher revenue expenditure requirements during the year. The center's capex has steadily increased from a long term average of 1.7 percent of GDP (FY09 to FY20) to 2.5% of GDP in FY22 PA. The center has also incentivized the state governments through interest free loans and enhanced borrowing ceilings to prioritize their spending on capex. Government has boosted allocations on infrastructure intensive sectors such as roads and highways, railways and housing and urban affairs, which has bearing on capex. This increase in capex will have implication for medium term growth and sustainable government debt to GDP ratio.

Which of the following strategy is adopted by Union Government to prioritise States’ spending on capex. 

1
Incentivizing for higher revenue expenditure 
2
Incentivizing for interest free loans and enhance borrowing ceilings 
3
Incentivizing for higher interest payment 
4
Incentivizing for large spending on tax 

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