Chapter

India's Fiscal Situation

Edited by T. N. Srinivasan

in Economic Policy Reforms and the Indian Economy

Published by University of Chicago Press

Published in print July 2002 | ISBN: 9780226454528
Published online February 2013 | e-ISBN: 9780226454542 | DOI: http://dx.doi.org/10.7208/chicago/9780226454542.003.0003
India's Fiscal Situation

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This chapter discusses the current state of Indian fiscal affairs. After the crisis of 1991, there was a period during which the fiscal deficit was somewhat decreased, but it has since increased, and prospects for its reduction without further policy measures are quite bare. It specifically examines the state finances, tax and expenditure reform, reduction of subsidies, and disinvestment. The current precarious fiscal situation of states is the result of increasing implicit and explicit subsidies on goods and services supplied by the government (electricity, irrigation water, transport, education, health) with virtually no attempt to raise revenues to finance them. A significant part of the fiscal correction in the early 1990s was through reductions in development spending, particularly capital spending, which could jeopardize growth. Increasing the tax capacity of the states and reducing transfers from the central government to the states as much as possible will enhance fiscal policy-making in India.

Keywords: Indian fiscal affairs; state finances; tax; expenditure reform; subsidies; disinvestment; capital spending; fiscal policy

Chapter.  19216 words.  Illustrated.

Subjects: International Economics

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