Fiscal federalism in india pdf. (PDF) Fiscal Federalism in India: An Analysis of Fiscal Transfers to States 2018-12-22

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Practice of fiscal federalism in India

fiscal federalism in india pdf

The surge in reported enrolments and retention rates in elementary education were aided by the implementation of the central government mid-day meal programme. Besides the Finance Commission and Planning Commission, various Central Ministries also make transfers to the states and, often, to local bodies directly, for specific purposes, under various Central Sponsored Schemes. Article by: Sangram Keshari Rout. Subsequently, there have been several studies quantifying the subsidies and estimating its nonmerit component following the methodology given in the first study. This chapter examines the interrelationship between fiscal reforms, fiscal rules and development spending. In so far environmental aspects were concerned, the state governments inter alia pointed out before the Twelfth Finance Commission that the maintenance of the forest area as per the working plans had become a problem due to financial constraints.

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Indian Federalism

fiscal federalism in india pdf

It should also encompass all levels of government. Given that agriculture as well as water resources are subjects assigned to the states in the constitution, although inter-state river water is the domain of the central government. A three-fold division was made in the Act of 1935: Federal List, Provincial List and Concurrent List. Is India a true federation? An important implication of these results is that policies aimed at disciplining subnational finances in the process of fiscal decentralization also tend to reduce subnational borrowing costs. Because these formulas lack explicit equalization standards, they fail to address regional equity objectives satisfactorily. The long term reform in this area should essentially do away with the distinction between the sources of income. The financial provisions of the Constitution are in accordance with what experts would consider acceptable principles for a federal constitution and a desirable attribute of inter-governmental tax power assignment Bagchi, 2001.


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Fiscal Federalism In India an Insight Into The Concept And Structure Of Sales Taxation

fiscal federalism in india pdf

The details of allocation of Central Plan Assistance to states based on the yardsticks of population, tax efforts performance , per capita income, ongoing irrigation and power projects, special problems and fiscal management are as given in Annexure 3. Sales tax is levied on the sale of a commodity, which is produced or imported and sold for the first time. Comprehensive and wide in coverage, the issues covered range from federal systems to other forms of intergovernmental relations, such as supra-national constructs namely, the European Union unitary states, regional systems, and more decentralized operations, including community level organizations. The criteria used in the past for these p urposes can be grouped under: a factors reflecting the needs, such as population and income, measured either as distance from the highest income or as inverse; b cost disability indicators such as area and infrastructure distance; and c fiscal efficiency indicators such as tax effort and fiscal discipline. The paper analyses trends in fiscal decentralization in the two largest countries of the world - China and India. It has an evolving structure, having begun in 2005 by putting together a number of disease specific programmes.


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(PDF) Fiscal Federalism in India: An Analysis of Fiscal Transfers to States

fiscal federalism in india pdf

The decline in the time horizon of politicians and parties has only added to the focus of governments on short term gains rather than focussing on longer term developmental agenda. Of course, requirements such as presenting compliance costs of various tax proposals have formidable data problems with the taxpayers unwilling to disclose the costs such as the amount of bribe paid to tax officials. This article argues that there is no simple or even complex uniform model for fiscal decentralisation in Africa. An important precondition for market promoting federalism is the hard budget constraint because fiscally responsible decision can come only under such an environment and therefore the policies should be calibrated to avoid bail-outs and free-riding behaviour. Surely, economic slowdown in 2008-09 has adversely impacted on the state finances significantly. The more local officials benefit from local economic activity, the more supportive of business and less corrupt they should be, resulting in higher output.

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Fiscal Federalism In India an Insight Into The Concept And Structure Of Sales Taxation

fiscal federalism in india pdf

The problem with borrowing from various sources is not one of softening the budget constraint alone. Therefore, the gap between high per capita income states and low per capita income states is also much wider than if the flow of funds because of remittances were to be taken into account. Of late State has succeeded in bringing about fiscal correction. Methodologies adopted to maintain equity contradict with methodologies used to increase efficiency. The Commission shall make its report available by the 31 day of October, 2009, covering the period of five years commencing on the 1st day of April, 2010.

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Fiscal Federalism In India Theory And Practice

fiscal federalism in india pdf

We propose a novel measure of regional exogenous shocks that we use to show that fiscal policy in Russia's regions has largely been pro-cyclical, exacerbating rather than moderating regional exogenous shocks. Furthermore, the entire indirect tax regime at the state level is segmented with a number of taxes coexisting such as purchase taxes, motor vehicles tax, passenger and goods tax, electricity duty, and entertainment tax which need to be unified into the goods and services tax. We also find that during periods of grant reduction, state governments maintain their expenditure programs by raising their own tax revenue. Reserved subjects were to be administrated by the Governor without any responsibility to the Legislature. The Governor is required to cause every recommendation made by the State Finance Commission together with an explanatory memorandum as to the action taken thereon to be laid before the Legislature of the state. After the review of the theories, the book examines the assignments system in Indian federalism and analyzes the instruments and institutions used to resolve overlapping in the assignment system. These can promote intergovernmental competition and minimise incentives for bail outs.

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Fiscal Federalism in India: Theory and Practice

fiscal federalism in india pdf

The Indian Constitution, while expressly vesting the Centre with greater powers of taxation, also provides for an institutional mechanism — the Finance Commission — to determine the share of the States in the Central tax revenues by way of correcting this imbalance. Therefore, it had spelt out its own functions in terms of the provisions of Article 280 of the Constitution. This paper analyses reforms in implementing fiscal policies in Indian fiscal federalism. In the power sector which is a concurrent responsibility, investment by the states in recent years in generation, transmission as well as distribution is negligible mainly because the electric utilities are unable to generate the surpluses needed for reinvestment on account of irrational pricing of electricity and poor operational efficiency. No popular responsibility was introduced at the Centre and the Governor General-in-council continued to remain responsible only to the British Parliament through the Secretary of State f or India. The details of the total transfer of financial resources from centre to states as percent of gross revenue receipts of the Centre in recent years are shown in the Table 3.

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Practice of fiscal federalism in India

fiscal federalism in india pdf

The distribution between the State and the Panchayats of the net proceeds of the taxes, duties, tolls and fees leviable by the state, which may be divided between them under this Part and the allocation between the Panchayats at all levels of their respective shares of such proceeds; 2. Available information on the revised estimates for 14 states for 2008-09 shows that the position has deteriorated as owing to the slowdown in the economy and declining tax devolution and the revenue surplus is likely to be reduced by about 0. The transfer system in this case will have to take into account many subterranean or invisible transfers. In the case of Sarva Shiksha Abhiyan, for example, the states are required to contribute 30 per cent as against the central contribution of 70 per cent. Our results challenge the dominant view in the literature. The stimulus to the states should be in terms of larger devolution rather than increased borrowing limits and the centre should meet this additional cost. The asymmetry is both vertical as well as horizontal.

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