Journal of Quantitative Economics

, Volume 17, Issue 1, pp 237–248 | Cite as

Towards India’s New Fiscal Federalism

  • Vijay KelkarEmail author
Policy Perspectives


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.


Fiscal federalism Goods and service tax Vertical imbalance Horizontal imbalance NITI Aayog Finance commission 

JEL Classification

H20 H25 H77 



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Copyright information

© The Indian Econometric Society 2019

Authors and Affiliations

  1. 1.National Institute of Public Finance and PolicyNew DelhiIndia

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