The Hindu | Perils of decentralisation with Chinese characteristics

Decentralisation, once celebrated as a reason for China’s economic miracle, seems to have now turned counter-productive

By Pranay Kotasthane & Manoj Kewalramani

Read the full article here.

Deccan Herald | Why a China-US thaw may not be in India’s economic interests

India now finds itself in a unique position, with the ability to leverage its relationship with the US to seek concessions.

By Anushka Saxena

Read the full article here.

The Print | India’s fiscal imbalance isn’t a North vs South problem. Here’s what lies at the ‘centre’ of it

India has a large vertical fiscal gap, which has been increasing. The reason is that while the Constitution assigns the most buoyant taxation powers to the Union, it allocates more spending responsibilities to the states.

By Pranay Kotasthane and Sarthak Pradhan

Read the full article here.

Times of India | Why resource distribution is creating a North-South divide

Over the last few days, there have been calls to form an economic alliance of southern states for equal resource distribution. Chief ministers from states such as Karnataka, Kerala, and Tamil Nadu held demonstrations in New Delhi to express their discontent. The Karnataka chief minister claimed that the current system for distributing resources among states puts states like Karnataka at a disadvantage while favouring states in the North with uncontrolled population growth. While the states’ concerns are valid, this focus on the horizontal distribution of tax resources is misplaced. Instead, the states should advocate for an enlargement of the divisible pool by calling for a curtailment in Union cesses and surcharges. Here’s why: Read the full article here.

The Hindu | The risk of small States’ heavy reliance on the Union government

The fiscal situation of India’s States has garnered significant attention in recent times. Despite ample data on State finances, most of the analysis is centred around larger States. There needs to be more discussion on the fiscal position of small States (i.e. States with a population of less than 1 crore). Most of these small States have distinctive characteristics that limit revenue mobilisation. Recognising these disabilities, the Constitution has provided mechanisms to address them. But these States continue to rely heavily on the Union government for revenue. This dependence creates vulnerabilities for the States as well as the Union. Read the full article here.

Fiscal Priorities for Sikkim

In a recent speech, Chief Minister of Sikkim, Prem Singh Tamang (Golay) announced the integration of more developmental projects in the upcoming budget. The successful execution of public projects and the effective implementation of government policies are contingent on the state's healthy fiscal situation. As the Sikkim Government prepares to present the budget, here is a look at the state's financial situation.

A look at the fiscal health of Goa

Goa Chief Minister has announced that the upcoming  state budget will be "futuristic & realistic" and has hinted at focused attention to specific sectors. The successful implementation of various budgetary proposals depends on the state's fiscal health - the ability of the state to mobilise enough revenues and spend it efficiently. Thus, it is imperative to look at the fiscal performance of Goa. This article attempts to analyse the state's fiscal concerns and seeks to figure out solutions.

A focus on fiscal consolidation. But what next?

This is a draft version of the article published in Prajavani, which is accessible here.

In the upcoming fiscal the Karnataka government seeks to contain the Fiscal Deficit at 2.6% and the liabilities at 24.2% of the Gross State Domestic Product (GSDP). It aims to generate a revenue surplus of Rs 402 crores. All the above are well within the key fiscal and debt norms set under the Karnataka Fiscal Responsibility Act (KFRA), 2002. It is worth noting that the Revenue Deficit (RD) Revised Estimates (RE) for 2022-23 is 40% of the 2022-23 Budget Estimates (BE). It is primarily because of higher-than-expected revenue collection in 2022-23.

Read the full draft here.

An analysis of measures to create jobs and boost industries : Union Budget 2022-23

This is a draft version of the article published in Prajavani, which is accessible here.

India's employment rate stands between 38% - 43%, against the global employment rate of 55%. According to CMIE data, India had 53 million unemployed people in December 2021. In the last few weeks, India witnessed violent protests by job seekers. As the Indian economy recovers from the pandemic, it must create enough jobs to avert an unemployment crisis. The Union Budget has some solutions to address the same, but it might not be enough.

Read the full draft here.

Dear Govt of India, Here’s Why a Cess Needs Impact Analysis Report

 During the 2021-22 Union Budget speech, Union Finance Minister Nirmala Sitharaman announced yet another cess — an Agriculture Infrastructure and Development Cess of Rs 2.5/litre on petrol and Rs 4/litre on diesel.At first glance, this just means that your commute got dearer. But scratch beneath the surface and you’ll realise that cesses such as these are gnawing away at India’s federalism. Here’s how.The divisible pool comprises taxes like corporation tax, taxes on income, customs, union excise duties, etc. It is called so because this pool of money gets ‘divided’ between the Union and the State governments through a formula recommended by the Union Finance Commission.In contrast, the money that union governments raise by levy of cesses and surcharges is not shared with the states. Cesses are earmarked taxes levied for specific purposes to provide necessary financial impetus to a particular sector/area. Surcharges are additional charges or taxes levied on existing taxes. A surcharge is calculated on payable tax, and not on income generated. Over the last few years, the union government has been increasingly relying on both cesses and surcharges, resulting in lesser resources being transferred to the states.Read the full article on The Quint

Making State Finance Commissions work

State Finance Commissions (SFC), constitutional bodies that recommend allocating resources between state and local governments, have had a chequered history in India. In yet another attempt to revive these institutions, the Fifteenth Union Finance Commission (15th UFC) recommended that the submission of SFC reports be a precondition for local governments to receive additional grants. The intention here is to nudge state governments to take SFCs seriously. In this article, we look at how this attempt might play out.Read the full article in Deccan Herald

An analysis of Social Security Measures : Union Budget 2021-22

This is a draft version of the article published in Prajavani, which is accessible here.

The COVID19 pandemic and its economic impact clearly showed that India's social protection measures were not enough. An analysis of the social security measures in the Union Budget 2021-22 can help us understand the Governments' priorities. The most important questions to be asked - Has the Union government prioritised social protection in the Budget? If yes, what is the realistic outcome it wants to achieve?

Read the full draft here.

Looking beyond the Budget numbers to see if government schemes really work

On February 1, the Union Finance Minister will present the annual financial statement — commonly called the Union Budget — to the Parliament. Soon after that, TV discussions and newspaper columns will be flooded with conversations on new schemes announced and monies allocated — why didn’t the government reduce subsidies by x per cent, why didn’t the government increase health expenditure by y per cent and so on.Read the full article in Deccan Herald

GST compensation delay put onus on states to mobilise funds from their own sources better. Here’s what they can do

At the end of a recently held Goods and Services Tax (GST) Council meeting, the finance minister signalled the Union government’s inability to pay compensation to the states, describing the revenue shortfall as an ‘Act of God’ caused by the pandemic. The Union abdicating its responsibility and leaving the states on its own is problematic on many grounds. In the last few weeks many commentators have succinctly explained this. But one question still remains unanswered: Can states do anything on their own to hedge against similar risks in the future?The Union has provided two options to the states – either borrow from the Reserve Bank of India (RBI) or from the open market. But both these measures create liabilities. A question worth considering is whether states can mobilise their own resources without creating liabilities.Read More