Publisher's Synopsis
Finance is the life blood of a government. Arrangements for finance are more complicated in a federal set up than in a unitary form of government. A federal system creates a multiple polity based on divided functions and powers among central and state governments. Fiscal federalism, as a branch of public finance, deals with financial arrangements and their working in a federal polity. As a financial blueprint of a government, budget is an important instrument to carry out its policies and programmes. It is through the budget that a government arranges financial resources and allocates them among competing uses. The high level of administrative, welfare and developmental activities of the Central Government make for colossal amounts of both receipts and disbursements. Such large-scale public transactions through the budget affect the economy in various ways. The level and composition of taxes influence the allocation of resources among various sectors of the economy, distribution of income among different economic classes, and macro management of the economy. Similarly, the borrowing policy of the Central Government affects the amount of national savings available to the private sector for consumption and investment. No less important are the effects of massive public expenditure on production, distribution and economic stabilization. Budget is not merely a statement of government accounts. It reflects the governments vision and signals the policies to come in future. Budget is also the chief source of government finance statistics to facilitate research and decisions on fiscal and economic matters. In India, the Central Government budget is designed mainly to ensure Parliamentary control and accounting scrutiny. Each year the Government has to obtain the authority of the Parliament to raise revenues to meet its expenditure. Budget of the government is perhaps the most important annual item on the agenda of the Parliament. Budget papers of the Government of India provide glimpses of the events, challenges and perceptions of the leaders. They highlight contemporary problems of the Indian economy and policy measures taken by the government to solve them, making for a fascinating study of Indias march towards development. Fiscal federalism is a subject of topical interest in India in view of some recent developments of historical importance. The Constitution (Eightieth Amendment) Act, 2000, significantly changed the manner of distribution of Central tax collections between the Central and State Governments. Prior to this Amendment, income tax and Union excise duties were the only taxes shared with the States. This Amendment altered the pattern of sharing of Central taxes between the Centre and the States by providing for the sharing of the net proceeds of all Union taxes and duties with the States. Enactment of the Constitution (One Hundred and First Amendment) Act, 2016 and the subsequent introduction of Goods and Services Tax (GST) from July 1, 2017, marked a clear departure from the initial scheme of distribution of taxation powers between the Centre and the States envisaged in the Constitution. Prior to enactment of the said Act, taxation powers between the Centre and the States were clearly demarcated in the Constitution of India with no overlaps between their respective domains. With the introduction of GST, fiscal federalism in India has moved from mutually exclusive to concurrent powers of taxation for the Centre and the States. Recommendations of the Finance Commission constitute the core of fiscal federalism in India. Finance Commission is a unique feature of the Indian Constitution without parallel in the existing federal constitutions of the world. Reports of the Finance Commissions provide in-depth insights into problems and their solutions in the highly complex area of federal finance. These Reports examine in detail, contemporary issues in Centre-State financial relations and recommend measures to solve them. Spread over 29 chapters, the book is organized into 2 parts. Part I (chapters 1 to 7) is titled Government Budgeting Procedures in India. This part provides conceptual framework for budgetary techniques, phases of budgetary cycle of the Government of India, parliamentary controls over the budget, components and structure of the budget, budgetary reforms and other topics related to the subject. It also includes highlights of each Central Budget from 1947-48 to 2021-22. Part II (chapters 8 to 29) is titled Centre-State Financial Relations (Fiscal Federalism) in India. This part covers conceptual settings for fiscal federalism, nature and features of Indian federation, centralization of revenues and channels of transfers to states, role of the Finance Commission, vertical distribution of resources, horizontal distribution of resources, and Constitution (One Hundred and First Amendment) Act, 2016, and the changed landscape of fiscal federalism in India. It also includes highlights and summary of each Finance Commission Report from First Finance Commission to Fifteenth Finance Commission. This work would prove useful for the students of economics, commerce, public administration and business management. An understanding of the mechanics of governmental financial transactions will also serve the needs of legislators, administrators and those in industry and trade.
