IDEAS home Printed from https://ideas.repec.org/p/ays/ispwps/paper05141.html
   My bibliography  Save this paper

India: Fiscal Condition of the States, International Experience,and Options for Reform: Volume 1 (2005)

Author

Abstract

India is a Union of 28 States, two Union Territories with legislatures, and five Union Territories without legislatures. The 7th Schedule of India’s Constitution provides for a separate State List, which enumerates exclusive legislative and executive authority that lies with state governments. The State List entrusts major responsibilities in the areas of human and physical development to the states. These responsibilities require major expenditures by the states, but the tax revenue sources assigned to the states, although they have not been fully used, are not sufficient to meet these expenditure responsibilities. The resulting fiscal imbalances of the states is addressed through a complex system of intergovernmental transfers in various forms and through several other channels, including borrowings. Over the years, in practice, the States of India have sought to finance their increasing needs for expenditures through different forms of transfers from the Union Government and loans, rather than by raising additional tax revenues and/or charging for services delivered. This has resulted in the states running large revenue and fiscal deficits and accumulating potentially unsustainable debt burdens. In this process, most states have compromised budgetary discipline, resorted to off-budget forms of borrowings, and accumulated large contingent liabilities, with the attendant risks of default. The lack of fiscal discipline among the states is symptomatic of a flawed intergovernmental fiscal system. In addition to the lack of aggregate fiscal discipline, the level and quality of services delivered by the states are well below where they ought to be with the money actually spent. There is much evidence of inefficient service delivery. For example, many states have high rates of illiteracy, particularly among women, and high infant and maternal mortality rates. In addition, the quality of economic services provided by the states, particularly electricity and transportation, is poor.

Suggested Citation

  • Roy Bahl & Eunice Heredia-Ortiz & Jorge Martinez-Vazquez & Mark Rider, 2005. "India: Fiscal Condition of the States, International Experience,and Options for Reform: Volume 1 (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper05141, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper05141
    as

    Download full text from publisher

    File URL: http://icepp.gsu.edu/files/2017/09/ispwp-05141.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Santiago Lago-Peñas, 2005. "Evolving Federations and Regional Public Deficits: Testing the Bailout Hypothesis in the Spanish Case," Environment and Planning C, , vol. 23(3), pages 437-453, June.
    2. Richard Bird & Pierre-Pascal Gendron, 2000. "CVAT, VIVAT, and Dual VAT: Vertical ``Sharing'' and Interstate Trade," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(6), pages 753-761, December.
    3. Ardagna, Silvia & Alesina, Alberto, 1998. "Tales of Fiscal Adjustment," Scholarly Articles 2579822, Harvard University Department of Economics.
    4. Roy Bahl & Eunice Heredia-Ortiz & Jorge Martinez-Vazquez & Mark Rider, 2005. "India: Fiscal Condition of the States, International Experience,and Options for Reform: Volume 2 (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper05142, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    5. Perotti, Roberto & Strauch, Rolf & von Hagen, Jürgen, 1997. "Sustainability of Public Finances," CEPR Discussion Papers 1781, C.E.P.R. Discussion Papers.
    6. Yasuyuki Sawada, 1999. "Community Participation, Teacher Effort, and Educational Outcome: The Case of El Salvador's EDUCO Program," William Davidson Institute Working Papers Series 307, William Davidson Institute at the University of Michigan.
    7. Alberto Alesina & Silvia Ardagna, 1998. "Tales of fiscal adjustment," Economic Policy, CEPR;CES;MSH, vol. 13(27), pages 487-545, October.
    8. Jorge Martinez-Vasquez & Jameson Boex, 2001. "Russia's Transition to a New Federalism," World Bank Publications, The World Bank, number 15248, January.
    9. Jorge Martinez-Vazquez & Andrey Timofeev & Jameson Boex, 2006. "Reforming Regional-Local Finance in Russia," World Bank Publications, The World Bank, number 6925, January.
    10. World Bank, 2004. "State Fiscal Reforms in India : Progress and Prospects," World Bank Other Operational Studies 14609, The World Bank.
    11. Shah, Anwar & Thompson, Theresa, 2004. "Implementing decentralized local governance: a treacherous road with potholes, detours, and road closures," Policy Research Working Paper Series 3353, The World Bank.
    12. Eckhard Wurzel, 1999. "Towards More Efficient Government: Reforming Federal Fiscal Relations in Germany," OECD Economics Department Working Papers 209, OECD Publishing.
    13. Richard Bird & Pierre Gendron, 1998. "Dual VATs and Cross-Border Trade: Two Problems, One Solution?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 429-442, July.
    14. Alberto Alesina & Roberto Perotti, 1995. "The Political Economy of Budget Deficits," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 1-31, March.
    15. Michael Kremer & Nazmul Chaudhury & F. Halsey Rogers & Karthik Muralidharan & Jeffrey Hammer, 2005. "Teacher Absence in India: A Snapshot," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 658-667, 04/05.
    16. Teresa Daban Sanchez & Steven A. Symansky & Gian M Milesi-Ferretti & Enrica Detragiache & Gabriel Di Bella, 2003. "Rules-Based Fiscal Policy in France, Germany, Italy, and Spain," IMF Occasional Papers 225, International Monetary Fund.
    17. Webb, Steven B., 2004. "Fiscal responsibility laws for subnational discipline : the Latin American experience," Policy Research Working Paper Series 3309, The World Bank.
    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. Richard M. Bird, 2012. "Subnational Taxation in Large Emerging Countries: BRIC Plus One," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1201, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Roy Bahl & Eunice Heredia-Ortiz & Jorge Martinez-Vazquez & Mark Rider, 2005. "India: Fiscal Condition of the States, International Experience,and Options for Reform: Volume 2 (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper05142, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. United Cities and Local Governments, 2011. "Local Government Finance," Books, Edward Elgar Publishing, number 14696, April.
    4. Roy Bahl & Sally Wallace & Musharraf Cyan, 2008. "Pakistan: Provincial Government Taxation," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0807, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

    More about this item

    Keywords

    india; intergovernmetnal; fiscal transfers; government expenditures;

    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:ays:ispwps:paper05141. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Benson). General contact details of provider: http://aysps.gsu.edu/isp/index.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.