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Trends and Issues in Tax Policy and Reform in India

Author

Listed:
  • M. Govinda Rao
  • R. Kavita Rao

    (National Institute of Public Finance and Policy)

Abstract

The Indian tax reform experience can provide useful lessons for many countries due to the largeness of the country with multilevel fiscal framework, uniqueness of the reform experience and difficulties in calibrating reforms due to institutional constraints. This paper details the evolution of the tax system and its reform over the years and analyses its efficiency and equity implications. In section 2, alternative models of tax system reform are presented with a view to identifying the best practice approach followed in tax system reforms. Section 3 analyses the evolution of Indian tax system and the impact of historical and institutional factors in shaping Indian tax policy. The trends in tax revenue are presented in section 4 and these point towards a relative stagnation and deceleration in tax revenues at both central and state levels. Section 5 analyses the reasons for the stagnation in revenues at central and state levels. This is followed by an exploratory discussion on the possible efficiency and equity implications of tax system. The final section presents directions for further reforms.
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Suggested Citation

  • 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.
    • Handle: RePEc:bin:indiap:v:2:y:2005:i:2005-1:p:55-122
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    Cited by:

    1. Rajesh Chadha, 2009. "Moving to Goods and Services Tax in India : Impact on India’s Growth and International Trade," Trade Working Papers 23071, East Asian Bureau of Economic Research.
    2. M. Govinda Rao & Sudhanshu Kumar, 2018. "Envisioning tax policy for accelerated development in India," Asia-Pacific Sustainable Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 25(1), pages 85-107, June.
    3. M. Govinda Rao, 2022. "Evolving Issues and Future Directions in GST Reform in India," Working Papers 2022-221, Madras School of Economics,Chennai,India.
    4. Ajit Karnik & Swati Raju, 2015. "State Fiscal Capacity and Tax Effort: Evidence for Indian States," South Asian Journal of Macroeconomics and Public Finance, , vol. 4(2), pages 141-177, December.
    5. Rao, M. Govinda, 2005. "Tax system reform in India: Achievements and challenges ahead," Journal of Asian Economics, Elsevier, vol. 16(6), pages 993-1011, December.
    6. Sacchidananda Mukherjee, 2017. "Changing Tax Capacity and Tax Effort of Indian States in the Era of High Economic Growth, 2001-2014," Working Papers id:11770, eSocialSciences.
    7. Anirudh Tagat, 2019. "The Taxman Cometh: Behavioural Approaches to Improving Tax Compliance in India," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 3(1), pages 12-22, March.
    8. Gupta, Poonam, 2015. "Generating Larger Tax Revenue in South Asia," MPRA Paper 61443, University Library of Munich, Germany.
    9. 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.
    10. Bhukta, Rikhia, 2025. "Factories and Fertility: The Impact of Manufacturing Growth on Son Preference," GLO Discussion Paper Series 1664, Global Labor Organization (GLO).
    11. Singh, Nirvikar & Srinivasan, T.N., 2006. "Federalism and economic development in India:An assessment," MPRA Paper 1273, University Library of Munich, Germany.
    12. 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.
    13. Isher Judge AHLUWALIA, 2008. "Rapid Economic Growth: Contributing Factors and Challenges Ahead," Asian Economic Policy Review, Japan Center for Economic Research, vol. 3(2), pages 180-204, December.
    14. Zheng Jian & Daniel Jeongdae, 2017. "Prospects for progressive tax reform in Asia and the Pacific," MPDD Working Paper Series WP/17/08, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    15. M.Govinda Rao, 2008. "Issues Before the Thirteenth Finance Commission," Working Papers id:1709, eSocialSciences.
    16. Rao, M. Govinda, 2017. "Public Finance in India in the Context of India's Development," Working Papers 17/219, National Institute of Public Finance and Policy.
    17. 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.
    18. Sacchidananda Mukherjee, 2015. "Present State of Goods and Services Tax (GST) Reform in India," Working Papers id:7532, eSocialSciences.
    19. Zaki, Chahir, 2010. "A Global Assessment of the Trade Facilitation Effects: the Case of MIRAGE Model," Conference papers 331990, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    20. M. Govinda Rao & Pinaki Chakraborty, 2006. "Multilateral adjustment lending to states in India: Hastening fiscal correction or softening the budget constraint?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(3), pages 335-357.
    21. 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.
    22. Singh, Nirvikar, 2007. "Fiscal Federalism and Decentralization in India," MPRA Paper 1447, University Library of Munich, Germany.
    23. Hoseini, Mohammad, 2015. "Value-Addes Tax and Shadow Economy : the Role of Input-Output Linkages (revision of CentER Discussion Paper 2013-036)," Discussion Paper 2015-058, Tilburg University, Center for Economic Research.
    24. Singh, Nirvikar, 2007. "Fiscal Federalism and Decentralization in India∗," Santa Cruz Department of Economics, Working Paper Series qt11b543tk, Department of Economics, UC Santa Cruz.
    25. Rakesh Mohan, 2008. "The Role of Fiscal and Monetary Policies in Sustaining Growth with Stability in India," Working Papers id:1778, eSocialSciences.

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