In India, fiscal consolidation is rule-based and focuses on deficits and debt. Macroeconomic concerns are not integrated with fiscal targets, which have been achieved at the cost of infrastructure investment. States have to use their revenues more effectively to spend on health and education, and borrow more to fund infrastructure. The centre must incentivise states to use their fiscal space effectively. A strategy for infrastructure investment by the central and state governments is discussed, especially in the context of the recommendations of the Fourteenth Finance Commission.
