This study examines the existing budgetary processes and suggests reforms with a view to establishing an efficient budgetary system in Uttar Pradesh.

A coherent approach to budget reforms involves aggregate and binding fiscal targets, incentive for improving allocation and utilisation of resources, autonomy of departments and decentralisation of responsibilities and outcome budgeting.

NIPFP undertook this consultancy through the competitive bidding process from the Asian Development Bank. The study relates to building capacity in the state to undertake fiscal reforms. Various components of the project include enhancing the budgeting system, expenditure magement and control, restructuring of the departments to enhance efficiency, reforms in the tax system, assistance to introduce value added tax (VAT), public enterprises restructuring programme and assistance in building the statistical system for measurement of state income and poverty.

This study looked at the state finces of the reorganised Uttar Pradesh while drawing appropriate comparisons with the undivided state. Except for the mid-nineties there was deterioration in the fiscal imbalance indicators which led to a high and unsustaible debt for the state. In 2002-03 the debt-GDP ratio was as high as 50 percent of GSDP. The rise in debt resulted from a high level of fiscal deficit, which had reached a peak of 6.3 percent of GSDP in 1999-00. Although in subsequent years there was some improvement, this study suggests a fifteen-fold reform strategy relating to four broad areas of fiscal magement covering revenue augmentation, expenditure reforms, fiscal discipline and budget magement, and public sector reforms.

The study estimates the cost of various tax preferences in terms of the revenue forgone. Both direct and indirect taxes are covered in the study.

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The NIPFP assisted the Department of Women and Child Development (DWCD) to come up with a methodological framework to assess the impact of gender budgeting in nine departments. As part of this effort, the NIPFP faculty members were expert resource persons in two workshops organized by the DWCD for these nine departments and for several other departments that have set up gender budgeting cells. The objectives of these workshops were to eble the ministries prepare a profile of their public expenditure and specify gender-disaggregated beneficiaries, conduct beneficiary incidence alysis and impact assessment, in terms of their outcomes on gender.

Using PROWESS data-base, distribution of number of companies over three year sub-periods (1989-90 to 1991-92, 1992-93 to 1994-95, etc. upto 2001-02 to 2003-04) has been obtained for manufacturing, mining, construction, electricity and services sectors. The selected companies have been classified according to their size (i.e. sales and total assets), and allocated to decile groups. The gross value added and corporate tax paid by companies are obtained.

This study examines appropriate structure of expenditure in terms of size and composition and formulates a medium-term expenditure policy for Uttar Pradesh. The study outlines the dimensions required for restructuring of expenditure in Uttar Pradesh. The study broadly covers the following areas basic considerations in formulation of medium-term expenditure policy; trends and structure of expenditure in Uttar Pradesh; expenditure policy; link between expenditure and its fincing; and measures to improve efficiency of government expenditure.

The fiscal situation of the state calls for multi-dimensiol reforms, augmenting tax revenues with distortion-minimising tax reforms, reducing interest payments, curbing growth of government employment, introducing a new strategy for handling pension liabilities, revamping state level public enterprises, curbing contingent liabilities and bringing debt within sustaible limits. To achieve a greater control and more effective intervention, the Fiscal Responsibility and Budget Magement Act [FRBMA] provides for reducing revenue deficit to zero by 2008-09, among other targets. This would help the state take benefits of the debt consolidation and relief facility based on the recommendations of the Twelfth Fince Commission.

Tax receipts model is primarily targeted at short-term forecasting and monitoring monthly (quarterly) tax receipts over a fincial year.

In this paper we have used quarterly tax data available upto the second quarter of 2005 to forecast tax revenue (CT and IT) for the FY 2005-06. In the second paper, we use the tax receipts model to forecast CT and IT for the FY 2005-06, using quarterly tax receipts data upto the third quarter of 2005.

This study alyses the resource requirements for meeting certain targets of the health sector and alyses the gap between the required and the actual expenditure in 15 major states in India. It also highlights the extent of resources that can be mobilised at the state level to meet the resource gap and estimates the residual gap that has to be met by central transfers. Estimates indicate that the additiol expenditures required for meeting the specific norms/targets in health and health related sectors are substantial. However, the capability of states to meet the additiol resource requirements is limited. Significant central transfers are needed at the state-level to meet the specific targets.

The rapid city assessments of Ludhia and Rajkot address the need for urban reform, potential bottlenecks, triggers for reform, and the reform agenda. Several measures such as the growth of population and land area, service delivery, and current finces including debt, suggest a need for fincial as well as institutiol reform in Ludhia. The major bottlenecks to reform in Ludhia and Rajkot are seen to be institutiol, and pertain to existing arrangements for water, sewerage and land use. Major triggers that could make the reform happen in Ludhia pertain to changes in institutiol arrangements for service delivery (privatisation in service delivery and public participation, and finces less of a trigger). It is found that the reform agenda in Ludhia should focus on getting the institutiol arrangements clear for the provision of water, sewerage services and land use. Further, magement of finces is crucial once octroi is formally abolished.

In Rajkot, the study finds that the statutory and institutiol structures were created on the principle of separate, distinct functiol and spatial jurisdictions, with little recognition that there are important interdependencies, both functiol and spatial. Furthermore, there is a need to revisit the statutory provisions. The finces of Rajkot Municipal Corporation are in an unsatisfactory state, despite surplus on revenue account and its ability to fince a part of capital expenditure out of its own resources. There is some long term thinking about the significant prospect of octroi abolition, and the related problem of ineffective property tax collection. Water accounts are most vulnerable and water pricing do not reflect the scarcity value of water, i.e., the economic cost.

Overall, it is observed that Ludhia and Rajkot, as with other Indian cities, while growing, present potential for a number of changes in their urban magement.

Octroi continues to be the most important source of revenue for municipalities in octroi-levying states. Accounting for anywhere between 50-70 percent of municipal revenues, octroi has provided to municipalities a degree of fincial stability and security that is substantially greater than the combined value of all other sources of revenue available to them. At the same time, octroi has been identified as a levy that creates barriers to free movement of goods and services, resulting in economy-wide losses of fuel and time. Several tax experts have called it a ‘bad tax’ and argued that octroi should have no place in an economy seeking freer trade and movement of goods and services. The Governments of Kartaka, Madhya Pradesh, and more recently Uttar Pradesh, Harya, and Rajasthan, have abolished the levy of octroi.

The issue in Punjab as in the other states is

what should octroi be replaced with? This report prepared at the instance of the Government of Punjab attempts to respond to this question. The report has made several suggestions in respect of meeting the loss that municipalities might incur in case of octroi abolition.

a. This toolkit is designed to assist city governments and other participating organizations in the Jawaharlal Nehru tiol Urban Renewal Mission (JNNURM) such as the state-level and city-level water supply and sewerage boards and development authorities in the formulation of City Development Plans (CDPs). The toolkit while outlying the scope of CDPs, provides an approach to identifying the key issues that need to be addressed and the options that are available with city governments to bridge the gap between where the city is at present, and where it plans to go.

The objective of these two projects is to initiate informed debate on the process of sub-tiol budgetary policies in various states in India. This capacity building exercise in eastern region states and western region states was coordited by involving local professiols, viz., academic community in economics and jourlists dealing with budgetary policy issues at state level. A comprehensive course on state level budgetary and fiscal policy was provided under the programme.