a. 70% of all tax revenues collected go to the Centre. All the states share the remaining 30%. This is as per a Constitution mandated Finance Commission.
b. The centre during our socialist era under a strong Mrs Indira Gandhi used this money leverage to kill state leadership and play power politics. But since the 70s, her Congress party has been vanquished in several states.
c. The tax sources for states primarily revolve around real estate taxes, octroi and excise duty (euphemism for booze). So states that have gone outside of government sources to do stuff, have typically leveraged land - e.g., Gujarat, Tamil Nadu, Rajasthan. Other than land and waiving taxes there is not much they can do, money wise.
d. States can't borrow directly on their own books - they don't have a revenue base worth talking about and don't run surpluses, by and large. All big foreign aid has to be approved through the Central government's Ministry of Finance.
The Muzaffarnagar riot was in a way an expected consequence of the fractured four-way vote split in the state of Uttar Pradesh. Clearly, a more effective carving of the pie was called for, and what better way than for two of the four to gang up against the other two? The BJP and SP, nominal enemies, seem to have conspired to play the roles of majority spokesman and minority protector, aiming to win votes from the Hindus and Muslims respectively, at the immediate cost of the Congress and BSP.