Federal Finance in India: An Analysis of Discretionary Transfers
Journal Title: VISION: Journal of Indian Taxation - Year 2017, Vol 4, Issue 1
Abstract
The essence of federalism lies in proper division of powers and functions among various levels of government to ensure adequate resources for their functioning. Although a formula-based practice has been mandated by the Indian Constitution through the setting up of the Finance Commission of India, there are several breaks in the practice. Some of the Central transfers are formula-based but there is considerable discretion in allocating other classes of transfers. In the era of Coalition politics there has been increasing disquiet, especially by the states ruled by opposition parties about alleged partisan behaviour by the Centre in the allocation of discretionary transfers. The present paper makes an attempt to examine the level, composition and disparity in per capita discretionary transfers from the Centre to the states; and explore the determinants of discretionary transfers. Two time points, viz. 2001-02 and 2011-12 are considered since the study has used census data for some variable. The empirical results show that there is significant diversity in the level of discretionary transfers to states. However, the disparity is not due to political factors. The states with higher fiscal deficit have got more discretionary transfers than the states having lesser deficit. Special category states get higher discretionary transfers as it is inherent in the structure of such transfers.
Authors and Affiliations
Chittaranjan Nayak, Priyabrata Satpathy
Keywords
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- EP ID EP623243
- DOI 10.17492/vision.v4i01.9990
- Views 263
- Downloads 0
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Federal Finance in India: An Analysis of Discretionary Transfers
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