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

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Issues before the Thirteenth Finance Commission

The Thirteenth Finance Commission faces a challenging task. Despite an improvement in recent years, the fiscal situation continues to be a matter of concern when off-budget liabilities and other fiscal risks are considered. With rising oil prices on the one hand and a surge in capital flows on the other, calibrating the transfer system in tune with counter-cyclical fiscal policy stance is a formidable challenge. This paper argues that irrespective of the wording of the terms of reference, the Commission would do well to focus on its primary task of recommending transfers to serve the objective of equity and incentives. While it is required to take into account a number of considerations, the focus should be on the transfer system. As an impartial body, the Commission should make a fair assessment of the central as well as state governments, ignoring the asymmetries in the wording of the TOR. As regards the transfer system itself is concerned, the paper argues that although it may be difficult to make drastic changes in the relative shares of the states, the Commission should give up the gap filling approach. Instead, after recommending tax devolution, the Commission should recommend grants to fully equalise expenditures on elementary education and basic healthcare. It is also possible to incentivise the transfer system for even those states that have a better record of providing education and healthcare to improve the quality of these services.

Use of Socio-Economic Criteria for Intergovernmental Transfers

While the reasons for intergovernmental grants are similar across nations, the applicability of and emphasis on each of these reasons may vary with the way public finances are organised in particular cases. An evaluation of the transfer system or a part of it thus requires an understanding of these objectives and an assessment of the extent to which these objectives are being met. This paper examines the transfer system that operates in India through the institution of the Finance Commission. The focus is on an evaluation of the need, appropriateness and manner of use of various socio-economic criteria in the design of transfers mandated by Finance Commissions over the years, placing them in the context of international experience.

Economic Consequences of Gujarat Earthquake

Even though the impact of the earthquake on the Gujarat's GSDP may not exceed a quarter per cent, it presents many challenges. Putting in place a proper policy framework may not only restore normalcy in the region, but can start a recovery boom. Estimating the loss from the earthquake is important for devising policies and drawing up requirements for assistance both from within and outside India. However, given all the limitations of the data, firm estimates of losses from the recent quake will take time to compile. In the interim, quantification is critical for designing relief and rehabilitation packages and implementing them before the onset of the monsoon. This paper is an attempt to estimate the economic impact of the earthquake.

Implications of 1994-95 Budget for Growth and Stability

The government has been emphasising the need for wideranging economic reforms ever since the economy pulled back from the brink of a crisis in 1991 Some of the reforms have been pushed through, but one of the major reasons for the economic situation reaching a crisis point in 1991


Tapas K Sen Government Budgeting in India by A K Sengupta; Print House (India), Lucknow, 1991.
THE budget document is probably the most Important document that the governme the most important document that the government produces regularly. The Finance Accounts, prepared by the Comptroller and Auditor General's office after auditing the accounts, give the actual stocks and flows with (usually) a couple of years' lag and the actuals given in the budget are supposed to t* the same as in the Finance Accounts for that year. This is, however, not always the case, and therein lies the story of how the elaborate checks and balances and the accountability of the executive envisaged in the Constitution have been subverted.

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