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Journal of Quantitative Economics

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

Towards India’s New Fiscal Federalism

  • Vijay KelkarEmail author
Policy Perspectives
  • 9 Downloads

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.

Keywords

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

JEL Classification

H20 H25 H77 

Notes

References

  1. Mohanty, B., N.R. Bhanumurthy, and A.G. Dastidar. 2017. What explains Regional Imbalances in Public Infrastructure Expenditures? Evidence from Indian States. Asia-Pacific Development Journal 24(2): 113–139.CrossRefGoogle Scholar
  2. Bhaskar, V., Vijay Kelkar. 2018. Reforming integrated GST (IGST), towards accelerating exports. Pune International Centre Policy Brief.Google Scholar
  3. Bhaskar, V., Vijay Kelkar. 2018. Reforming the GST, Do we need the eWay bill? Pune International Centre Policy Brief.Google Scholar
  4. Chakraborty. L., and P. Chakraborty. 2018. Federalism, fiscal asymmetries and economic convergence: Evidence from Indian States. Asia-Pacific Regional Science Journal. 2(1): 83–113.Google Scholar
  5. Panagariya, Arvind. 2010. India on the growth turnpike: No state left behind. In India on the growth turnpike, essays in honour of Vijay L. Kelkar, ed. Sameer Kochhar, Academic Foundation, Delhi.Google Scholar
  6. Report of the high level committee on balanced regional development issues in Maharashtra, Government of Maharashtra, October 2013.Google Scholar

Copyright information

© The Indian Econometric Society 2019

Authors and Affiliations

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

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