Fiscal Federalism in India : Challenges and Reforms

The book discusses various facets of fiscal federalism in India. The central concern is to explore the challenges and the process of reforming the federal fiscal arrangements with a view to mitigate fiscal imbalances and establish a sound system of federal finance. After examining the whole range of the evolution of federal fiscal system in India, the book identifies the factors due to which federal fiscal tensions have become the most critical challenge of India's federal economy explicating the federal fiscal imbalances. The relative roles of Plan and non-Plan fiscal transfers have been examined with a view to highlight the imperatives and mechanism of fiscal readjustment for inclusive and equitable growth. In fact, with the reincarnation of the Planning Commission in the form of 'NITI Aayog' and its redesigned role, the role of Finance Commission has become largely dominant as was initially contemplated by the framers of Indian constitution. It is against this perspective that the book examines at length the recommendations of the Fourteenth Finance Commission. It is lamented that with the quantum jump in the States' share in Central divisible pool the States have been given more fiscal autonomy in implementing development schemes. Significantly, this major reform in Indian fiscal federalism quite clearly calls for augmenting fiscal resources by the States themselves pointing towards emergence of cooperative fiscal federalism.