A Comparison of Fiscal Capacity of States in India: A Regression Approach

Ashok Mittal () and Abbas Haider Naqvi ()
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Ashok Mittal: Aligarh Muslim University
Abbas Haider Naqvi: Institute of Economic Growth

Chapter Chapter 4 in Challenges and Issues in Indian Fiscal Federalism, 2018, pp 31-45 from Springer

Abstract: Abstract The States with low taxable capacity need special help in terms of more funds for providing the social and economic services. In addition to ‘equalization’, another important consideration in a sound federal fiscal transfer scheme is for ‘relative tax effort’. It is also one of the important objectives of a federation to induce federating units to make high resource mobilization efforts as is warranted by their capacity. Both fiscal capacity and tax efforts are very important criteria in the scheme of federal fiscal transfers aiming at achieving objectives of equity and efficiency. However, the usefulness of these criteria depends entirely upon their accurate measurement. A wrongly construed or arbitrarily measured taxable capacity or effort can defeat the very purpose of inclusion of these criteria in the scheme of devolution. Here, in this paper the focus is only on fiscal capacity and it is also treated as a measure of horizontal imbalances.

Keywords: Fiscal capacity; Horizontal imbalance; Federal transfers; Own tax revenue (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-10-6217-9_4

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DOI: 10.1007/978-981-10-6217-9_4

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