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The Paradox of Fiscal Imbalances in India

Author

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  • M. Mahamallik
  • P. Sahu
  • S. Mahapatra

Abstract

An attempt has been made to examine the nature and extent of fiscal imbalances in India using the secondary data over a period of thirty years from 1980-81 to 2009-10 (BE). It has been established that there is persistence and growing vertical as well as horizontal fiscal imbalances even after a series of corrective fiscal measures. Efforts to reduce these imbalances found to be ineffective due to contradictions among different measures of fiscal orrection. Methodologies adopted to maintain equity contradict with methodologies used to increase efficiency. The 14th finance commission may take initiative to resolve this paradox through a weight adjustment solution which can be helpful in reducing the imbalances. In addition to it, adequate generations of revenue through increasing tax efforts on the part of states and reform in the transfer system are essential for maintaining fiscal balances.

Suggested Citation

  • M. Mahamallik & P. Sahu & S. Mahapatra, 2014. "The Paradox of Fiscal Imbalances in India," Working Papers wp969, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:wp969
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    References listed on IDEAS

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    1. Roland Spant, 2003. "Why Net Domestic Product Should Replace Gross Domestic Product as a Measure of Economic Growth," International Productivity Monitor, Centre for the Study of Living Standards, vol. 7, pages 39-43, Fall.
    2. Chakraborty, Pinaki, 2011. "Deficit Fundamentalism vs Fiscal Federalism: Implications of 13th Finance Commission's Recommendations," Working Papers 11/81, National Institute of Public Finance and Policy.
    3. Rangarajan, C. & Srivastava, D.K., 2005. "Fiscal deficits and government debt in India: Implications for growth and stabilisation," Working Papers 05/35, National Institute of Public Finance and Policy.
    4. repec:npf:wpaper:35 is not listed on IDEAS
    5. M. Govinda Rao, 2003. "Incentivizing Fiscal Transfers in the Indian Federation," Publius: The Journal of Federalism, CSF Associates Inc., vol. 33(4), pages 43-62, Fall.
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    More about this item

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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