Explanation:
If richer regions can attract more investment than poorer regions because of their larger ex ante tax bases, then fiscal federalism adversely affects the growth prospects of poorer regions by reducing the resources available for either central or regional governments to fund valuable projects in poorer regions.Often geographical constraints, market imperfections, government policies, a lack of law & order, identity, per capita income and various socio-economic reasons can contribute to regional disparity such that some regions are more backward than other areas falling within the same nation
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