Indira Rajaraman

Fiscal Strains in the Indian Federation


The focus of the talk is on the absence of a standing fiscal adjudication body between layers of government in the Indian fiscal federation. This is set in the context of the big India growth story, which has been accompanied by widening spatial disparities in rates of growth.

The first section of the talk will outline the basic institutional features of the Indian fiscal structure in terms of statutory provisions for redressing spatial inequalities. Finance Commissions are appointed every five years to re-set the formulas governing the statutory sharing of fiscal resources between the Centre and the States.

The second section will deal with the issues consequent upon the recommendations of the Twelfth Finance Commission (TFC) for the horizon 2005-2010. The third section will go into other issues of more long standing, calling for resolution. The lack of participatory outcomes to these inter-governmental issues carries growth and development implications, since it is at the level of state governments where responsibility for health and school education is the greatest.