IDEAS home Printed from https://ideas.repec.org/p/npf/wpaper/19-265.html
   My bibliography  Save this paper

State of Public Finance and Fiscal Management in India during 2001-16

Author

Listed:
  • Mukherjee, Sacchidananda

    (National Institute of Public Finance and Policy)

Abstract

During 2001-16, State Finances in India have undergone significant changes in both revenue mobilization and controlling expenditures which helped states to contain deficits (revenue as well as fiscal). Introduction of Value Added Tax (VAT) helped states to augment revenue mobilization whereas adoption of Fiscal Responsibility Budget Management (FRBM) Act helped states in prudential fiscal management. During the period, the improvement in union finances was not as good as state finances. There were two significant shocks to Indian public finances during 2001-16 - firstly, introduction of pay revision for the union as well as majority state government employees, in response to recommendations of the Sixth Central Pay Commission and secondly, global financial crisis (2008-09). States experienced revenue shocks mostly through fall in states' share in central taxes and a mild fall in own tax revenue mobilization during 2008-10. Higher pressure on revenue expenditure due to implementation of the pay commission recommendations (including revision of pensions and payment of arrears) and falling share in central taxes resulted in rise in revenue deficits for states during 2008-10. As a strategy to combat fiscal shocks, different states adopted different measures and some of the measures have inter-temporal implications. The objective of the present paper is to assess the impact of the shocks in Indian public finances and identify challenges for the times to come. Though increasing revenue (`front loading') and reducing expenditure (`back loading') are common responses to any fiscal shock, understanding inter-temporal implications of those responses with specific to changing structure of inter-governmental fiscal transfers could be an interesting exercise.

Suggested Citation

  • Mukherjee, Sacchidananda, 2019. "State of Public Finance and Fiscal Management in India during 2001-16," Working Papers 19/265, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:19/265
    Note: Working Paper 265, 2019
    as

    Download full text from publisher

    File URL: https://www.nipfp.org.in/media/medialibrary/2019/05/WP_265_2019.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. M. Govinda Rao & R. Kavita Rao, 2005. "Trends and Issues in Tax Policy and Reform in India," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 2(1), pages 55-122.
    2. Sacchidananda Mukherjee, 2020. "Inter-governmental Fiscal Transfers in the Presence of Revenue Uncertainty: The Case of Goods and Services Tax (GST) in India," Journal of Development Policy and Practice, , vol. 5(1), pages 74-102, January.
    3. Patnaik, Ila & Pandey, Radhika, 2019. "How much equity capital should a central bank hold?," Working Papers 19/262, National Institute of Public Finance and Policy.
    4. Jena, Pratap Ranjan, 2019. "Living under Fiscal Rules: Fiscal Management Response and Resource Allocation Choices for State of Odisha," Working Papers 19/264, National Institute of Public Finance and Policy.
    5. Rao,R. Kavita & Mukherjee,Sacchidananda, 2019. "Evolution of Goods and Services Tax in India," Cambridge Books, Cambridge University Press, number 9781108473965.
    6. Amarnath, H.K. & Singh, Alka, 2019. "Impact of Changes in Fiscal Federalism and Fourteenth Finance Commission Recommendations: Scenarios on States Autonomy and Social Sector Priorities," Working Papers 19/257, National Institute of Public Finance and Policy.
    7. Amarnath H. K. & Alka Singh, 2019. "Impact of Changes in Fiscal Federalism and Fourteenth Finance Commission Recommendations Scenarios on States Autonomy and Social Sector Priorities," Working Papers id:13029, eSocialSciences.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pandey, Radhika & Patnaik, Ila, 2019. "Financial sector reforms in India," Working Papers 19/267, National Institute of Public Finance and Policy.
    2. Mukherjee, Sacchidananda, 2022. "Revenue Assessment of Goods and Services Tax (GST) in India," Working Papers 22/385, National Institute of Public Finance and Policy.
    3. Sacchidananda Mukherjee, 2023. "Revenue Implications of GST on Indian State Finances," India Studies in Business and Economics, in: D. K. Srivastava & K. R. Shanmugam (ed.), India’s Contemporary Macroeconomic Themes, chapter 0, pages 123-151, Springer.
    4. Mukherjee, Sacchidandanda, 2020. "Possible Impact of Withdrawal of GST Compensation Post GST Compensation Period on Indian State Finances," Working Papers 20/291, National Institute of Public Finance and Policy.
    5. Pandey, Radhika & Patnaik, Ila, 2019. "Fiscal policy cyclicality in South Asian economies," Working Papers 19/268, National Institute of Public Finance and Policy.
    6. J.S. Darshini & K. Gayithri, 2023. "An Econometric Analysis of Revenue Diversification Among Selected Indian States," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 24(1), pages 41-63, March.
    7. Sacchidananda Mukherjee & Shivani Badola, 2021. "Public Financing of Human Development in India: A Review," Indian Journal of Human Development, , vol. 15(1), pages 62-81, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bose, Sukanya & Noopur, A. & Nayudu, Sri Hari, 2022. "Intergovernmental Fiscal transfers and Expenditure on Education in India: State level analysis, 2005 to 2020," Working Papers 22/377, National Institute of Public Finance and Policy.
    2. Sacchidananda Mukherjee & Shivani Badola, 2021. "Public Financing of Human Development in India: A Review," Indian Journal of Human Development, , vol. 15(1), pages 62-81, April.
    3. Chakraborty, Lekha S, 2019. "Indian Fiscal Federalism at the Crossroads: Some reflections," MPRA Paper 93516, University Library of Munich, Germany.
    4. Mukherjee, Sacchidananda, 2019. "Whether States have Capacity to Sustain Projected Growth in GST Collection during the Compensation Period?," Working Papers 19/275, National Institute of Public Finance and Policy.
    5. Mathur, Ritu & Jaitli, Namrata & Amarnath HK,, 2022. "Child Development Index in India: Performance at District Level," Working Papers 22/371, National Institute of Public Finance and Policy.
    6. Sacchidananda Mukherjee, 2020. "Estimation and Projection of Petroleum Demand and Tax Collection from Petroleum Sector in India," Journal of Infrastructure Development, India Development Foundation, vol. 12(1), pages 39-68, June.
    7. Samik Chowdhury & Indrani Gupta, 2020. "Fiscal Space and Expenditure Priorities post -14th Finance Commission: A Study of Five Indian States," IEG Working Papers 400, Institute of Economic Growth.
    8. Bose, Sukanya & Bera, Manasi & Ghosh, Priyanta, 2020. "Centre-State Spending on Elementary Education: Is it Complementary or Substitutionary?," Working Papers 20/320, National Institute of Public Finance and Policy.
    9. Mukherjee, Sacchidananda, 2015. "Present State of Goods and Services Tax (GST) Reform in India," Working Papers 15/154, National Institute of Public Finance and Policy.
    10. Nirvikar Singh, 2007. "The dynamics of reform of India’s federal system," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(01), pages 22-31, April.
    11. Neba Bhalla & Rakesh Kumar Sharma & Inderjit Kaur, 2023. "Effect of Goods and Service Tax System on Business Performance of Micro, Small and Medium Enterprises," SAGE Open, , vol. 13(2), pages 21582440231, June.
    12. Rakesh Mohan, 2008. "The Role of Fiscal and Monetary Policies in Sustaining Growth with Stability in India," Working Papers id:1778, eSocialSciences.
    13. Mukherjee, Sacchidananda, 2017. "Changing Tax Capacity and Tax Effort of Indian States in the Era of High Economic Growth, 2001-2014," Working Papers 17/196, National Institute of Public Finance and Policy.
    14. Sacchidananda Mukherjee, 2020. "Inter-governmental Fiscal Transfers in the Presence of Revenue Uncertainty: The Case of Goods and Services Tax (GST) in India," Journal of Development Policy and Practice, , vol. 5(1), pages 74-102, January.
    15. Amarnath, H.K. & Singh, Alka, 2019. "Impact of Changes in Fiscal Federalism and Fourteenth Finance Commission Recommendations: Scenarios on States Autonomy and Social Sector Priorities," Working Papers 19/257, National Institute of Public Finance and Policy.
    16. Mukherjee, Sacchidananda, 2020. "Performance Assessment of Indian GST: State-level Analysis of Compliance Gap and Revenue Growth," Working Papers 20/301, National Institute of Public Finance and Policy.
    17. Gupta, Manish & Chakraborty, Pinaki, 2019. "State Finance Commissions: How successful have they been in Empowering Local Governments?," Working Papers 19/263, National Institute of Public Finance and Policy.
    18. Rao, M. Govinda & Kumar, Sudhanshu, 2017. "Envisioning Tax Policy for Accelerated Development in India," Working Papers 17/190, National Institute of Public Finance and Policy.
    19. M. Govinda Rao, 2018. "Public finance in India: some reflections," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 45(2), pages 113-127, June.
    20. Singh, Nirvikar, 2007. "Fiscal Federalism and Decentralization in India∗," Santa Cruz Department of Economics, Working Paper Series qt11b543tk, Department of Economics, UC Santa Cruz.

    More about this item

    Keywords

    Indian Public Finance ; Indian State Finances ; Fiscal spillover ; Fiscal Management ; Revenue mobilization ; inter-governmental fiscal relationship ; Revenue Deficit ; Fiscal Deficit;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:npf:wpaper:19/265. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: S.Siva Chidambaram (email available below). General contact details of provider: http://www.nipfp.org.in .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.