Decentralization, indirect tax reform and fiscal federalism in India

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Abstract

    It is a time honoured cliche that India is a country of immense diversity. In operational terms, a well-established and functioning federalism is a dire necessity for effective governance of the country. A fundamental requirement for this is the establishment of a relationship of trust between all principal stakeholders in India's federal set-up: the central government, states, regions and even villages and panchayats. This involves inter alia that all stakeholders be clear about their responsibilities and rights and that financial flows between these stakeholders are predictable and easily understood. This, of course, does not imply a financial straitjacket but the clear enunciation of rules and circumstances under which departures from the established norms would be undertaken. Such arrangements would require constant review, updating and recalibration of the entire gamut (and not piecemeal) of federal relations - tax, expenditure and transfers. This is particularly important at this time since there is widespread agreement that states have become the new engines of economic growth in India whence inter-state and centre-state financial relations should remain positioned on an even keel to ensure high economic growth and the consequent poverty reduction.
    Original languageEnglish
    Title of host publicationIndia's Fiscal Policy Prescriptions, Pragmatics and Practice
    Editors Supriyo De
    Place of PublicationUnited Kingdom
    PublisherCambridge University Press
    Pages35-86pp
    EditionFirst
    ISBN (Print)9781107152632
    Publication statusPublished - 2017

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