Intergovernmental fiscal relations in India: Time for the Next Generation of Reforms

D.K. Srivastava
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D.K. Srivastava: Executive Council Member, Madras School of Economics, and Chief Policy Advisor, EY India and formerly Director, Madras School of Economics

Working Papers from Madras School of Economics,Chennai,India

Abstract: The system of intergovernmental fiscal relations in India has steadily evolved over the last seven decades under the guidance provided by Finance Commissions. Various dimensions of the fiscal landscape in India have been subjected to periodic reforms. In spite of these, India’s tax-GDP ratio has effectively stagnated over the last thirty years. Recent GST reforms have also qualitatively and quantitatively affected the relative position of resources for the central and state governments. Debt and fiscal deficit stabilization which has been subjected to Fiscal Responsibility Legislations also requires a relook due to certain inbuilt inconsistencies which have been highlighted in the paper and in view of the current global challenges. This paper suggests that it is time for undertaking the next generation of reforms that would guide intergovernmental fiscal relations in India in the emerging future. The suggested reforms cover issues pertaining to uplifting India’s tax-GDP ratio, comprehensive GST reforms, mechanisms and formulae used in determining intergovernmental transfers, and Fiscal Responsibility Legislations.

Keywords: Intergovernmental relations; fiscal reforms; tax-GDP ratio; debt sustainability; GST reforms; finance commission (search for similar items in EconPapers)
JEL-codes: E61 E62 H21 H25 H63 H77 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2022-07
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