Public Finance in India in the Context of India’s Development
- M. Govinda Rao
- Dec 2017
- National Institute of Public Finance and Policy (NIPFP)
- India
An analysis of public spending in India reveals a gaping inadequacy of funds for development and capital expenditures in the country. The reasons for this lies in India's low levels of taxation, - tax–GDP ratio in the country is lower by 2-3 percentage points for its level of per capita GDP - and tax exemptions and subsidies. This has led to large deficits and accumulation of debt which are a threat to macroeconomic stability. The paper argues that there is a strong case
for creating a fiscal council by amending the FRBM Act, that it is should be appointed by the Parliament and should be reporting to it as recommended by the Fourteenth Finance Commission. This is in contrast to the Fiscal Review Committee’s recommendation according to which the Fiscal council should be appointed by the Finance Ministry and should report to it.
