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

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A Humane Philosopher

A tribute to K G Kannabiran, the lawyer, civil rights activist and enunciator of constitutional rights, who for more than half a century fought for the rights of the oppressed and the victims of violence across the country. K G Kannabiran, 82, died in Hyderabad on 30 December 2010.

Complex Implications of the Cancun Climate Conference

When the dust settles after the Cancun climate change conference of the United Nations, a careful analysis will find that the adoption of the "Cancun Agreements" may have given the multilateral climate system a shot in the arm, but that the meeting also failed to save the planet from climate change and helped pass the burden of climate mitigation onto developing countries. Instead of being strengthened, the international climate regime was weakened by the now serious threat to close the legally binding and top-down Kyoto Protocol system and to replace it with a voluntary pledge system.

Kyoto Is Dead, Long Live Durban?

The Kyoto Protocol, with its crucial distinction between developed and developing countries, was critically wounded in Copenhagen and has virtually been buried at Cancun. It may be predicted with some confidence that the Kyoto Protocol will be replaced at the next climate change conference in Durban by a single framework for all categories of nations. Binding and stiff emission reduction targets for developed countries, decided on the basis of the science and the sustainable upper limit for atmospheric greenhouse gas concentrations, now appear set to be replaced by a bottom-up pledge-and-review process with potentially dangerous outcomes for global climate.

Vertical Sharing and Horizontal Distribution of Resources: The Equity and Efficiency Trade-off

Examining the key recommendations of the Thirteenth Finance Commission that have a bearing on vertical and horizontal transfers aimed at correcting imbalances in the system, this paper takes a critical look at these two aspects as well as the grants given to states. It also reviews the overall design of transfers by decomposing these to identify their vertical and equalising content, pointing to problems that could arise in the long run. Yet it concedes that despite several drawbacks, the commission has arrived at a mechanism for transfers that includes some desirable features.

Report of the 13th Finance Commission: Introduction and Overview

This special issue on the Report of the Thirteenth Finance Commission has eight experts evaluating its recommendations from different perspectives. While acknowledging the many plus points of the report, the writers also draw attention to its numerous drawbacks, ranging from a lack of proper attention and omissions to faulty logic. There is little doubt that some of the recommendations, if implemented in the right spirit, will benefit the management of public finances in the country. However, an awareness of the report's limitations could serve as an antidote to not slipping up again.

Deficit Fundamentalism vs Fiscal Federalism: Implications of 13th Finance Commission's Recommendations

The Thirteenth Finance Commission's recommendation to increase the vertical share of tax devolution to states will help, but its horizontal distribution formula leaves much to be desired. One, its design is such that two of the four key indicators are in conflict with each other. Two, the commission's revised road map for fiscal consolidation at the centre and the states, which recommends state-specific, year-wise, fiscal adjustment paths, not only limits the fiscal manoeuvrability of states but also impinges on their fiscal autonomy. Three, its design of the grant for elementary education has the potential to reduce the expenditure of states rather than augment it. The need to look at intergovernmental transfers from the right perspective of federalism, where the states and the centre are seen as equal partners in development and not from a narrow technocratic viewpoint, cannot be stressed more.

Goods and Services Tax: The 13th Finance Commission and the Way Forward

The Thirteenth Finance Commission was required to look into the revenue impact of the introduction of the goods and services tax. Its report, based on the recommendations of a task force constituted to study the issue, recommends a highly uniform and centralised format that does not adequately recognise a tax reform exercise in a multi-level fiscal system that involves compromises and trade-offs. While several flaws can be pointed out in its design, developments that have taken place before and since the report was submitted have to a large extent rendered the commission's recommendations irrelevant. All this underlines the need for a model that goes beyond uniform rates of tax and allows states to vary beyond a floor, with a fixed classification of commodities and services, so that they can choose an appropriate rate to ensure that their revenue requirements are met.

Fiscal Consolidation and Inclusive Growth: The Finance Commission Approach

The recommendations of the Thirteenth Finance Commission, made in the context of the fiscal stress that was experienced during the global crisis, include relaxation of fiscal targets for purposes of macrostabilisation, preparation of a fiscal adjustment programme for 2010, raising both public and private investment by creation of fiscal space for government capital expenditure and ensuring fiscal viability. The commission's emphasis on allowing for macrostabilisation as a means of raising productive investment is unexceptionable, so too are many of the reforms that have been suggested. However, the lack of an adequate analytical framework has made the overall recommendations less than satisfactory. This inadequacy is reflected in a failure to identify the basic conditions that call for anti-recessionary measures and their optimal combination, a neglect of distortionary and gdp-reducing effects of subsidies, viewing outlays on human resource development as current rather than capital expenditure, a neglect of conditions governing crowding in and crowding out of investment, treatment of disinvestment as part of investible resources and the clubbing of domestic and external debt and of debt held by the public and the Reserve Bank of India.

Recommendations Relating to Grants-in-Aid

The Thirteenth Finance Commission's recommendations on the use of grants-in-aid in the transfer of resources to states seem relatively very generous when compared to those of its predecessors. This paper looks at the issue from various angles, including the alternative options it could have used, and assesses their implications. In particular, it examines whether the commission's underlying rationale for resorting to grants-in-aid for a variety of purposes is justified in terms of actually giving states an additionality of resources and ensuring that the sums will be spent for what they are intended. It points out that the grants-in-aid have widened the scope for growth-enhancing social spending in the long run and constricting the insidious spread of centrally-sponsored schemes, which encroach on the domain of states.

The 13th Finance Commission's Report: Conundrum in Conditionalities

Critically appraising the recommendations of the Thirteenth Finance Commission, this paper points out that despite some tinkering with one of the indicators, its approach to tax devolution suffers from the same limitations as those of earlier commissions. More alarmingly, the inability to offset the fiscal disabilities of the states has led it to recommend as many as 12 different types of grants with a host of conditionalities. There are serious questions over the design and implementation of these conditions, in addition to monitoring compliance. Besides, the commission's recommendations on the goods and services tax have been resented by the states and this has actually taken the reform agenda backwards. All this lends weight to the suspicion that yet another opportunity to reform the transfer system has been lost.

The 13th Finance Commission and Improving Fiscal Outcomes: An Assessment

The Thirteenth Finance Commission does not seem to have chosen the best possible path to meet its mandate of recommending ways to make public expenditure less wasteful and inefficient, in other words, of making the spending of public money more outcome-oriented. However, its report has a number of important suggestions that should help achieve output-oriented outlays, though these do not add up to a comprehensive reform package for result-oriented expenditure reform. Though it has done admirably well given the constraints it faced, two major problems with its approach are not noting the importance of unit costs of public outputs and inadequately treating the distinction between outputs and outcomes.

The 13th Finance Commission and the Third Tier

Evaluating the recommendations of the Thirteenth Finance Commission with reference to panchayati raj institutions and urban local bodies and their implications for genuine fiscal federalism in India, this paper finds data related to local governments across states and over time to be wanting in many respects. Yet, as broad aggregates, they help throw some light on the magnitudes and trends in expenditure and own source revenue of the third tier from 2002-03 to 2007-08. It concludes that the commission's sins aside, it has in some ways departed significantly from the past and made suggestions that could strengthen democratic decentralisation if they are fully implemented.

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