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A Comparison of Fiscal Capacity of States in India: A Regression Approach

In: Challenges and Issues in Indian Fiscal Federalism

Author

Listed:
  • Ashok Mittal

    (Aligarh Muslim University)

  • Abbas Haider Naqvi

    (Institute of Economic Growth)

Abstract

The States with low taxable capacity need special help in terms of more funds for providing the social and economic services. In addition to ‘equalization’, another important consideration in a sound federal fiscal transfer scheme is for ‘relative tax effort’. It is also one of the important objectives of a federation to induce federating units to make high resource mobilization efforts as is warranted by their capacity. Both fiscal capacity and tax efforts are very important criteria in the scheme of federal fiscal transfers aiming at achieving objectives of equity and efficiency. However, the usefulness of these criteria depends entirely upon their accurate measurement. A wrongly construed or arbitrarily measured taxable capacity or effort can defeat the very purpose of inclusion of these criteria in the scheme of devolution. Here, in this paper the focus is only on fiscal capacity and it is also treated as a measure of horizontal imbalances.

Suggested Citation

  • Ashok Mittal & Abbas Haider Naqvi, 2018. "A Comparison of Fiscal Capacity of States in India: A Regression Approach," India Studies in Business and Economics, in: Naseer Ahmed Khan (ed.), Challenges and Issues in Indian Fiscal Federalism, chapter 0, pages 31-45, Springer.
    • Handle: RePEc:spr:isbchp:978-981-10-6217-9_4
    DOI: 10.1007/978-981-10-6217-9_4
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