ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by D K SrivastavaSubscribe to D K Srivastava

Fiscal Transfers in Australia

This paper examines the working of Australia's fiscal transfer system in the context of its long-term evolution, paying particular attention to salient changes that have occurred since the introduction of a comprehensive Goods and Services Tax (GST). The GST has served to increase the vertical imbalance in the system, which was high even prior to this change, by placing more revenue resources with the Commonwealth Government in Australia. In spite of a high degree of expenditure centralisation, considerable emphasis is placed in Australia on achieving horizontal fiscal equalisation through an elaborate mechanism of equalisation transfers, which looks into both revenue and expenditure sides of the state budgets and calculates revenue and expenditure 'disabilities' that account for departures from a pure equal per capita distribution of the shareable amounts. This paper looks at the equity and efficiency implications of the Australian equalisation transfers and considers its relevance for the Indian system, which has many comparable features. Apart from the need for making equalising features of the Indian transfer system more transparent, there is need for emphasising some cost disabilities, particularly those that are structural and exogenous in nature.

Fiscal Transfers in Canada

The Canadian system of fiscal transfers, developed over a long period of time, has two central features: equalisation grants, which are constitutionally guaranteed and the Canadian Health and Social Service Transfers (CHST). This paper examines the relevance and applicability of the Canadian system of inter-governmental transfers in the Indian case. Equalisation grants are meant to ensure that provinces have sufficient revenues to provide reasonably comparable levels of services at reasonably comparable levels of taxation. An elaborate 'representative tax system' approach using individual revenue bases is used in Canada for determining the equalisation grants, although there has recently been a debate to use a more macro approach. The source-by-source approach is less practical in the Indian case for want of comparable and reliable information required for applying the method. A more practical alternative is the macro approach, which is adopted in India, but better indicators of fiscal capacity than those based on GSDP need to be used. In addition, the concept of ensuring that resources are available for maintaining the per capita expenditure of select basic services at certain levels among states, as attempted in Canada through the CHST transfers, is worth exploring.

Dynamics of Debt Accumulation in India

Accumulation of debt can be seen as the resultant of the balance between cumulated primary deficits and the cumulated weighted excess of growth over interest rate. Decomposing the change in the central governmentâ??s liabilities relative to GDP since 1951-52, it is seen that but for three recent years, the accretion to debt relative to GDP was due to the cumulated primary deficits. A significant part of the effect of the cumulated primary deficits could be absorbed in the sixties, seventies, and the nineties due to the excess of growth over interest rate. However, there were large unabsorbed parts in the fifties and the eighties. The cushion provided by the excess of growth over interest rate may not continue to be available for long. For three years, viz, 2000-01 to 2002-03, the interest rate exceeded the growth rate. This, together with the continuing primary deficits though at a reduced level, led to acceleration in the increase in the debt-GDP ratio in recent years. For stabilisation of the debt-GDP ratio at current or reduced levels, focus on primary balance becomes necessary.


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