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India: Redesigning Fiscal Federalism after the Global Financial Crisis

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  • Raghbendra Jha

Abstract

Partly as a result of the Fiscal Responsibility Act (passed in 2003) the gross fiscal deficits of both central and state governments were in good order. Indeed, both central and state governments were running primary surpluses in 2006-07 and 2007-08. Partly as result of the stimulus enacted to counter the effects of the Global Financial Crisis (GFC) both central and state government have been running primary deficits since 2008-09 as a result of which gross fiscal deficits and debt have risen significantly. At the same time individual states (particularly those that were previously lagging) have provided substantial impetus to the growth of the national economy. Against this background this paper addresses three themes: (i) How should fiscal relations between centre and states be re-organized to further enhance aggregate economic growth? (ii) How should the structure of transfers between centre and states be reorganized to get back to the pre-GFC path of fiscal deficits. (iii) How should indirect tax reform, in particular the introduction of the GST, be handled?

Suggested Citation

  • Raghbendra Jha, 2014. "India: Redesigning Fiscal Federalism after the Global Financial Crisis," ASARC Working Papers 2014-07, The Australian National University, Australia South Asia Research Centre.
    • Handle: RePEc:pas:asarcc:2014-07
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    File URL: https://crawford.anu.edu.au/acde/asarc/pdf/papers/2014/WP2014_07.pdf
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    References listed on IDEAS

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    1. Emran, M. Shahe & Stiglitz, Joseph E., 2005. "On selective indirect tax reform in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 599-623, April.
    2. Indira Rajaraman, 2007. "The Political Economy of the Indian Fiscal Federation," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 4(1), pages 1-51.
    3. Mukherjee, Sacchidananda & Rao, R. Kavita, 2014. "Exploring Policy Options to include Petroleum, Natural Gas and Electricity under the Proposed Goods and Services Tax (GST)Regime in India," Working Papers 14/136, National Institute of Public Finance and Policy.
    4. Ghate, Chetan (ed.), 2012. "The Oxford Handbook of the Indian Economy," OUP Catalogue, Oxford University Press, number 9780199734580.
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    Cited by:

    1. Ms. Janet Gale Stotsky & Mr. Asad Zaman, 2016. "The Influence of Gender Budgeting in Indian States on Gender Inequality and Fiscal Spending," IMF Working Papers 2016/227, International Monetary Fund.
    2. Janet G Stotsky & Asad Zaman, 2017. "The Influence of Gender Budgeting in Indian States on Gender Inequality and Fiscal Spending," Working Papers id:11587, eSocialSciences.

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