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Another look at fiscal transfers Editorial 25th Mar’19 TheHindu

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Headline : Another look at fiscal transfers Editorial 25th Mar’19 TheHindu

Details :

Significance of federalism:

Federalism in India with much centralisation:

Central government held responsible for all subjects:

 

Fiscal federalism

Distribution of functions to various levels:

Distribution of fiscal powers:

Various models on this:

 

Finance Commission recommendations and other modes of revenue sharing:

Revenue sharing between Centre and States moving towards greater share for States:

 

Modes of revenue sharing

Finance Commission now in control of unconditional transfers with Planning Commission disbanded:

What happens if a future government brings back centralized planning?

 

Ways to ensure States’ revenues are not too dependent on the government at the centre:

  1. Fixing the proportion of shareable taxes:
  1. Powers to States to tax income:

Option 1 more feasible:

 

Horizontal distribution also needs balanced criteria without taking too much from the richer states:

 

Importance:

GS Paper II: Polity

 

 

Section : Editorial Analysis
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