Centre-State Relations in Indian Fiscal Context

This volume is a festschrift in honour of Sri B.P.R. Vithal, the founder of CESS, who was a pioneer in wiping out the revenue deficit of Andhra Pradesh and initiating regional planning. His contribution to the subject of Indian fiscal federalism is well-known to the administrators and academicians of this field. He raised the issues—plan-non-plan dichotomy, imbalances in the ToR of Finance Commissions,changing contours of central assistance for state plans, growing centralisation and ever increasing Centrally Sponsored Schemes (CSS) to name a few—much before they became focal.

The perennial debates—particularly in the domain of finances—across the federations on their bias in favour of the central government, the devolution of a part of the central government’s revenue to the state governments, and inter se distribution among the latter with due regard to horizontal fiscal imbalances, are common in the Indian Union too. The impact of economic reforms on centre-state financial relations in India is quite clear from the Terms of Reference of the last four Finance Commissions.

A significant increase in the Planning Commission transfers through central sector and CSS, and side-lining of formula-based transfers (modified Gadgil/Mukherjee formula) influenced the financial relations between the centre and the states, affecting specific sectors (health, education, etc.) and expenditure patterns of the state governments. The recent economic slowdown raises issues of effective interdependence between fiscal and monetary policies in the process of economic stabilisation.

Though an attempt to statutorily bring the local bodies into the federal structure of the country through the 73rd and 74th amendments to the Indian constitution is a welcome feature, the pace of progress in this direction has been nominal. This book assumes importance in the backdrop of these issues.

The 19 chapters in this volume (Section I to V),apart from the overview, examine Centre-state relations in Indian fiscal context, ranging from the global context to national, sub-national, and local finances, more specifically on sub-central government finances and the fiscal relations between the central and sub-central government entities—where there has been relatively less attention. It also gives an overview of a panel discussion on “Issues Before Fourteenth Finance Commission” (Section VI). Section VII comprises “Personal Tributes to B.P.R. Vithal”.

It is earnestly hoped that this collection will be a useful...