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

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Issues before the Thirteenth Finance Commission: Correction of Horizontal and Vertical Imbalances

The Thirteenth Finance Commission has been constituted against the backdrop of strong fiscal correction and consolidation by most of the state governments. The present paper analyses the trend and composition of fiscal transfers in India and puts forward some options/proposals which the thfc may consider. In the context of fiscal restructuring, the thfc could emphasise the quality of fiscal correction. The thfc may consider widening the shareable pool of central taxes by including service tax. In the context of fiscal efficiency, apart from tax effort, the thfc may give adequate weight to non-tax collection effort. The thfc may also consider providing more purpose-specific grants for the social sectors such as education, health, etc, along with considering ''the need to enhance social sector expenditure'' as a criterion for horizontal sharing.
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