<p>This study re-examines the long-debated relationship between government expenditure and national income in post-reform India, with particular emphasis on maintaining a clear distinction between central-government-level and aggregated (central and state) fiscal dynamics. Using annual time-series data and robust econometric techniques, including unit root tests, co-integration analysis, and causality frameworks, the study provides nuanced evidence on the direction of fiscal-growth linkages. The findings reveal that at the central government level, the Keynesian hypothesis is strongly supported, indicating that public expenditure plays a proactive role in stimulating national income. In contrast, when government activity is analyzed at the combined (central and state) level, evidence largely favors Wagner’s Law, suggesting that economic growth drives the expansion of public spending. These differentiated results underscore the importance of fiscal federalism in India and highlight that policy prescriptions cannot be uniform across governance levels. The study offers important implications for designing level-specific fiscal strategies aimed at growth, sustainability, and effective public finance management.</p>