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Towards India’s New Fiscal Federalism

Author

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  • Vijay Kelkar

    (National Institute of Public Finance and Policy)

Abstract

This paper raises three challenges in India’s development strategy: vertical imbalance, horizontal imbalance and development imbalance. To address these issues, it argues that there is a need for relooking at the existing fiscal federalism architecture in India. It proposes four pillars for India’s new fiscal federalism, which is currently having only one pillar in the form of Union Finance Commission. As a second pillar, the paper argues that there is a need for an institution, say New NITI Aayog that have financial powers for allocating for developmental schemes, to address the issue of increasing regional and sub-regional imbalances in India. Further, the paper argues for having constitutional arrangements for sharing the GST proceeds with the third Tier, which forms the third pillar. And lastly, it points towards implementation of ‘flawless GST’ as the fourth pillar of new fiscal federalism.

Suggested Citation

  • Vijay Kelkar, 2019. "Towards India’s New Fiscal Federalism," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(1), pages 237-248, March.
    • Handle: RePEc:spr:jqecon:v:17:y:2019:i:1:d:10.1007_s40953-019-00159-x
    DOI: 10.1007/s40953-019-00159-x
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    References listed on IDEAS

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    1. Lekha Chakraborty & Pinaki Chakraborty, 2018. "Federalism, fiscal asymmetries and economic convergence: evidence from Indian States," Asia-Pacific Journal of Regional Science, Springer, vol. 2(1), pages 83-113, April.
    2. Biswajit Mohanty & N.R. Bhanumurthy & Ananya Ghosh Dastidar, 2017. "What explains regional imbalances in public infrastructure expenditure? Evidence from Indian states," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 24(2), pages 113-139, December.
    3. Arvind Panagariya, 2010. "India on the Growth Turnpike: No State Left Behind," Working Papers 1111, School of International and Public Affairs, Columbia University, revised Nov 2010.
    4. Mohanty, Biswajit & Bhanumurthy, N. R. & Dastidar, Ananya Ghosh, 2017. "What explains Regional Imbalances in Infrastructure?: Evidence from Indian States," Working Papers 17/197, National Institute of Public Finance and Policy.
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    Cited by:

    1. Chakraborty, Lekha S, 2019. "Indian Fiscal Federalism at the Crossroads: Some reflections," MPRA Paper 93516, University Library of Munich, Germany.

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    More about this item

    Keywords

    Fiscal federalism; Goods and service tax; Vertical imbalance; Horizontal imbalance; NITI Aayog; Finance commission;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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