Challenges to Indian Fiscal Federalism
The principle of fiscal federalism enshrined in India's Constitution is under severe strain today.
This book is a key addition to understanding the challenges involved. The authors capture the implications of the abolition of the Planning Commission, the introduction of the controversial Goods and Services Tax regime, and formulation of Terms of Reference of the 15th Finance Commission. These include the increase in vertical fiscal inequity, distortion of fairness in inter-State distribution, and erosion of policy autonomy at the level of the States.
Kerala has seen a unique effort to advance the devolution process from the State level to the panchayats and municipalities. Besides taking the path-breaking decision to devolve 40 per cent of State plan funds to local government institutions, the Kerala experiment involved a mass campaign to build capacity of local government. Kerala's Finance Minister Thomas Isaac and his co-authors argue that protecting and enhancing devolution is essential for strengthening popular participation in development decision-making.
This book is being published at a time when some of the State finance ministers have been leading a campaign on the need for revisiting certain Terms of Reference of the 15th Finance Commission. This involvement in a movement to reverse the tendency to erode both the fiscal and policy autonomy of the State gives the book an edge and urgency that will place it at the centre of the debate on the attack on Indian federalism.
Dr T.M. Thomas Isaac, Finance Minister, Kerala and principal author of 'Challenges to Indian Fiscal Federalism', in conversation with Vijay Prashad, the chief editor of LeftWord Books, New Delhi on 7 January 2019.
. . . provide[s] useful insights into the historical context of federalism and offer[s] an elaborate analysis of its emerging tendencies. Authors . . . are eminent policymakers and scholars, having both the insiders' perspectives, by virtue of being at the helm of the affairs manoeuvring the federal machine from vital positions, and the intellectuals' reserve to assess the problems from afar. . . . [The book] articulates effectively the perspectives of the states on many contentious issues.
Anita Rath, Economic & Political Weekly
Challenges to Indian Fiscal Federalism . . . makes a strong case that the Indian central government has been appropriating increasing shares of revenue and of the power of decisions, thus reducing the power to act of the sub-national governments. This book makes a valuable statistical case for the above view. It will be endorsed by many . . .
Vito Tanzi, Financial Express