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

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Financial Management in States-Role of Finance Commission

This paper compares the actual fiscal behaviour of the states as against that envisaged for them by the Finance Commission. It looks at deviations from the commission's projections of revenue receipts of 14 non-special category states. Deficits/surpluses that actually emerged as against those that were expected are analysed, A closer look is taken of tax revenue by comparing the actual growth rates of four major state taxes with the rates adopted by the Eighth Finance Commission. The methodology adopted by the Ninth Finance Commission is evaluated from the point of view of its responsibility of promoting resource mobilisation and economy in expenditure. Some approaches to building up an incentive/disincentive structure that would reward financial discipline and penalise profligacy are examined.

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