Statement–Assumption (Centre Directs States to Cut Spending): Statement: The Central Government has directed State Governments to reduce expenditure due to a serious resource crunch and may not sanction additional grants to states for the next six months. Assumptions: I) State Governments are totally dependent on the Centre for their expenditure. II) The Central Government has reviewed State expenditure accounts. III) State Governments will abide by the directives.

Introduction / Context:
When a superior tier of government issues directives with a time-bound funding stance, the logical assumptions involve compliance feasibility rather than sweeping claims about total fiscal dependence or undisclosed audits.

Given Data / Assumptions:

• Centre instructs states to cut expenditure.
• Centre signals it may not sanction additional grants for six months.
• Objective: manage resource crunch.

Concept / Approach:
A directive is purposeful only if it is expected to influence behaviour (compliance). It does not require assuming absolute dependence of states on the Centre, nor does the statement imply that the Centre has reviewed all state accounts beforehand.

Step-by-Step Solution:
I: “Totally dependent” is an extreme, unnecessary claim. States also have own revenues and borrowings. Not implicit.II: A review could be helpful but isn’t necessary for issuing a generic directive about austerity in a crunch. The statement does not hinge on prior audits. Not implicit.III: For the directive to be meaningful, the Centre must assume states will largely comply (or that it has leverage via grants). This compliance expectation is implicit.

Verification / Alternative check:
Hierarchical guidance often assumes adherence or at least partial alignment through incentives/sanctions (e.g., withholding grants). This supports III as necessary even without I or II.

Why Other Options Are Wrong:
Including I overstates dependency; including II adds an unmentioned precondition; “All/None” ignores the central practical assumption of compliance.

Common Pitfalls:
Equating policy direction with prior detailed audits; presuming absolute fiscal dependence rather than substantial but partial reliance.

Final Answer:
Only III is implicit.