This paper proposes a method to compute a composite measure of infrastructure development by combining the available services of physical infrastructure. The value of the infrastructure development index (IOI) for 17 major Indian states for the period 1990­9J to 1996-97 is estimated. Also obtained are the weights to be attached to different physical infrastructural services. The telecommunication services turn out to be the most dominant among the chosen physical infrastructure services, followed by the transportation sector and availability of energy/power services. A positive relationship is seen between the 101 and per capita net state domestic product .

The study covered an in-depth analysis of structure and administration of sales tax in Indian states. The coverage included an analysis of rates, base, and exemptions of sales tax system in each state in India. It analysed the weaknesses of the existing sales tax systems and recommended reforms required to introduce VAT in Indian states. The existing system of taxation of inter-state trade i.e. Central Sales Tax Act has also been analysed. The analysis covered assessment of the existing system and recommendation of various options for making CST a destination based tax. Further, the coverage included organisation and operation of sales tax as well as management information system for sales tax administration. The study finally makes recommendations for reform in organisation and operation of the existing sales tax system when the same is converted into a system of state VAT. The work has subsequently been published as a book titled, Sales Tax and Value Added Tax in India.

This paper attempts to estimate and analyse the extent of budgetary subsidies in health sector during 1985-86, 1991-92 and 1998-99 covering six major states in India. The analysis suggests that the budgetary allocations to health sector has been declining while at the same time the cost of treatments for households has been increasing as evidenced by the two surveys of the National Sample Survey Organisation (NSSO). However, the real per­capita subsidies to health sector recorded a substantial increase during 1985-86 and 1998­99. Of the total subsidies, subsidy on merit health services accounted for less than 25 per cent only, except in Maharashtra. There is no substantial evidence for the positive relationship between budgetary spending or subsidies and health status indicators. But the complementary nature of budgetary spending and the household spending on health warrants for an increasing role of the governments in health sector in order to improve the levels of health care consumption.

The objective of this study is to examine the interface between subsidies and environment with a view to highlighting both the positive and perverse roles that subsidies may play in affecting the environment. The study estimates environment related subsidies that emanate from government budgets. Main results of this analysis are: subsidies identified as having a bearing on the environment account for less than one percent of GDP (center and states considered together) – of these subsidies having a clear positive impact on the environment are only a small fraction; and environment-related subsidies emanate relatively more from the state budgets. Conventional economic analysis obscures the degradation of the natural resource base that supports the economy, including the agriculture of a country- changes in productivity and availability of natural resources simply are not taken in to account. Economic research documenting the relationship between farm practices and environmental degradation is scanty. This report develops an analytical framework, which allows identifying the impact of input use on environmental quality and crop yield. The model incorporates the environmental variables directly into the farm production function. From the framework, environmentally optimal levels of input use can be identified, which also serve to derive the input price changes needed in order to move farmers towards the social optimum.

NIPFP was retained by the Ministry of Petroleum, Government of India, to provide necessary research support to a committee set up for determining royalty rates to' states on the extraction of crude petroleum from within their area. More specifically, the NIPFP team was required to provide analysis of an economically sound system of fixing royalty rates that are practicable and fair to the concerned parties. The report examined the extant basis of royalties and possible alternatives, and after examining the related issues made its recommendations on royalty rates. So far, the report has not been disseminated, pending finalization of the report of the governmental committee to which it was submitted.

In this paper, a method to compute a composite measure of infrastructure development by combining the available services of physical infrastructure is prepared. The value of the infra­structure development index (IDI) for 17 major Indian states for the period 1990-91 to 1994­95 is estimated. The weights to be attached to different physical infrastructural services are also obtained. The telecommunication services turn out to be the most dominant among the chosen physical infrastructure services, followed by the transportation facilities and availabil­ity of energy/power services. A positive relationship has been established between the IDI and per capita net state domestic product.

In the context of the continuing external liberalization as well as the multilateral trade negotia­tions under the auspices of the WTO, a need to have a comprehensive database on customs tariff and tariff bindings has been felt. This would serve as a preamble to review customs tariff vis-a-vis our international commitments on tariff bindings, compare customs tariff in India with that in competing countries, compute tariff equivalent of non-tariff barriers, and analyze revenue implications of alternative proposals on changes in customs tariff. Further, a user-friendly interactive programme can add value to such a database. The current database makes a small, but useful beginning in this direction. It focuses on customs tariff and tariff bindings in SAARC counties (Bangladesh, India, Nepal, Pakistan, and Sri Lanka), for 1999-2000. Bhutan and Maldives are excluded, as they are not members of WTO. In addition, for India, it pro­vides also the customs tariff for the year 1998-99 and sales tax rates (as on April 1, 1998) for 20 selected states of India. Included in the database is also the information on India's exports to and imports from 221 countries during 1997-98, the latest year for which such information was available.

The database is developed at the six-digit level of disaggregation based on the interna­tional harmonized system nomenclature (HSN) of commodities. Accordingly, there are 5247 items (or tariff lines) in the database. This database is being presented in Microsoft Excel format, amenable to statistical computations.

Public expenditure reform is a necessary element of all fiscal reform, but must clearly be underpinned by some understanding of the time-series properties of public expenditure. The paper models public expenditure at the level of state governments in India as a univariate process, as a first step in that direction, confined to three states: Punjab, 'Haryana, and Maharashtra, over the period 1974-98. There is trend stationarity in Punjab and Haryana, with a deterministic trend growth rate of 16-17 per cent, and clear evidence thereby of fiscal smooth­ing in the presence of periodic upward shocks of Pay Commission or other origin. In Maharashtra by contrast, aggregate expenditure carries a unit root, with no deterministic trend, and no drift term; expenditure shocks of other than Pay Commission origin appear to have been enabled with no corresponding smoothing, but there is sharp and concurrent smoothing at the time of the Pay Commission shocks, such that aggregate expenditure does not show a spike. The issue of whether the fiscal smoothing in each case was unproductive or productive remains unrevealed in the aggregate figures.

The study reviews the current system of taxation in Sri Lanka, with a view to suggest measures for capacity building on fiscal devolution in Sri Lanka. Directions for reform of national as well as provincial taxes are given. Reform measures which can be implemented within the existing constitution and those requiring amendment of the constitution are mentioned separately. An attempt is also made to estimate revenue potential of the major taxes, with the suggested reforms.

This paper examines the design and outcomes of fiscal flows to the third tier from both centre and state governments, with an exclusive focus on the rural sector, where the third tier carries greater formal incrementality, and poses the more formidable challenge. Inter­governmental flows to the rural third tier are dwarfed by the massive direct expenditure by the central government targeted at rural areas amounting annually to between 1-2 percent of CDP. The most important issue from the developmental perspective therefore has to do with improving the low utilisation rates of this direct central expenditure on rural infrastructure and other schemes. By contrast, the intergovernmental provision by the Eleventh Finance Commission from the centre to rural local bodies for 2000-2005 amounts to well under 0.1 percent of CDP annually. State shares of the Eleventh Finance Commission provision are based on formulae carrying an overwhelming weightage for rural population, thus rewarding failure to control population growth, rather than progress towards decentralisation, contrary to what is claimed. The formal introduction of the third tier has not led to any convergence in the variation across states in local resource generation, pointing to the critical need for embodying incentives for fiscal autonomy and local resource generation in the design of fiscal devolution. There is clear scope for revenue additionality in the Indian fiscal system taken as a whole through transfer to the local fiscal domain of the power to tax agriculture, presently underexploited in the state domain. Finally, the absence of any central funding for local elections is a glaring omission in the approach to devolution in India, given the fiscal stress at state level, and the ever present threat to the quality of the local election process.

The paper performs a panel reg.ession on the definitionally uniform data now available for G five-year period ending in 1999-2000, on non-performing loans of commercial banks. The exercise is confined to 27 public sector banks, so as to investigate variations within a class that is homogeneous on the ownership dimension. The exercise groups banks with higher than average NPAs into those explained by poor operating efficiency, and those where the operating indicator does not suffice to explain the high level of NPAs.