ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Archana R DholakiaSubscribe to Archana R Dholakia

Some Hits and Misses

The Fourteenth Finance Commission has come up with some bold and game-changing recommendations such as an increase in the tax share going to states from 32% to 42%, setting up of the Fiscal Council to make the centre accountable, and doing away with direct transfers to states under centrally-sponsored schemes. But unlike the Thirteenth Finance Commission the FFC has not bothered to estimate the impact of the Goods and Services Tax and disinvestment proceeds on gross domestic product as well as fiscal space. The discontinuation of the practice of giving special weight to a Fiscal Discipline Index, started by the Eleventh Finance Commission is an unwelcome development. This, coupled with the provisions of the revenue deficit and untied grants, is likely to encourage fiscal profligacy among several states.

Deficits and Recession: Role of Subnational Governments

A critique of two arguments in "Subnational Public Finance in Times of Recession" (EPW, 28 August 2010) relating to fl exible, state-specifi c fi scal targets and the role of the state governments in dealing with the effects of the fi nancial crisis.

A Comment on the Distribution Formula of the 13th Finance Commission

Out of the four different criteria used by the Thirteenth Finance Commission for inter se devolution of taxes, the criteria of fiscal capacity and fiscal discipline, which are given a weightage of about two-thirds in the formula, are inadequate, inconsistent and subjective. The allocation outcome based on such a formula, along with the discretionary nature of grants neither reflects equalisation nor efficiency and hence provides confusing signals to states for their future fiscal behaviour and growth orientation.

Expenditure Allocation and Welfare Returns to Government

A model of government expenditure allocation among sectors is developed and its application is illustrated through the data on major Indian states from 1971 to 1991. It is argued that, at the margin, changes in expenditure allocation are determined not by the magnitude of marginal productivities of the government effort, but by the behaviour of marginal returns in relative terms. Nine indicators from education, health, nutrition and other social sectors measure the index of basic welfare as the output of government efforts. Revenue and capital expenditures of state governments on the economic (physical capital) sectors and social (human capital) sectors are considered over two decades - 1971-81 and 1981-91 to examine the stability of the coefficients.

Fiscal Imbalance in Gujarat

Gujarat needs to raise its non-tax revenue to ease its fiscal crisis. This article analyses Gujarat's non-tax revenue and subsidies to find possibilities of improvement. Contrary to the spirit of economic reforms the state in Gujarat is more active in areas from which it should withdraw as shown by high economic subsidies, and it is less active in areas where intervention is called for as shown by low social sector subsidies.
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