Projects
Past projects
Public Sector Borrowing Requirements of States
- Start date Sept., 2023
- Completion date April, 2024
- Sponsor The Foreign, Commonwealth and Development Office (FCDO) of the Government of the United Kingdom support for the study of India’s fiscal issues for the Sixteenth Finance Commission under Project No. 400047
- Project leader Manish Gupta, Malvika Mahesh and Sk Md Azharuddin
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Focus
The study attempts to develop a mechanism of data gathering for a more comprehensive and realistic assessment of the total public sector borrowings by select States in India. It also provides estimates of total public sector borrowings by the selected States. In doing so, it quantifies off-budget liabilities of these States and examines the guarantees given by them in light of the provisions of their respective FRBM Acts.
Defining Explicit Subsidies and Fiscal Space in the Context of Fiscal Health of States
- Start date Sept., 2023
- Completion date March, 2024
- Sponsor The Foreign, Commonwealth and Development Office (FCDO) of the Government of the United Kingdom support for the study of India’s fiscal issues for the Sixteenth Finance Commission under Project No. 400047
- Project leader Amarnath H.K.
- Consultants/Other authors Smriti Banati and Meena
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See details
India’s stagnant revenues and increasing expenditures at the State level have been a major fiscal concern. Increasing welfare expenditures and explicit subsidies is an issue of debate of State finances in recent past. With Government of India’s stress on need for significant spending on infrastructure and capital expenditure, there is a need to look at the concepts of committed expenditure, fiscal space and explicit subsidies. It is so important that ‘subsidies’ is always substituted with expenditures on schemes or bypassed in the form of assistance or grants-in-aid in government accounting system. Shrinking fiscal space and continued Covid-19 pandemic-induced welfare expenditure and explicit subsidies are major factors which affect the deterioration of fiscal health of the States. This paper attempts to define the committed expenditure in a structural way and define explicit subsidies so as to include similar expenditures that are like subsidies but not classified as subsidies. Overall analyses show that those States which have revenue deficit need to think of not only restricting committed expenditure but also rationalizing subsidies. Financing subsidies and welfare expenditure through borrowing is not sustainable in the long run and also result in reduction of expenditure on infrastructure. Thus, there is a need for improving the fiscal space and rationalizing the subsidies including in the form of freebies.
Rationalization of Explicit Budgetary Subsidies at State Level
- Start date Nov., 2023
- Completion date March, 2024
- Sponsor NITI Aayog
- Project leader Amarnath H.K., Sri Hari Nayudu A.
- Consultants/Other authors Mitali Gurdatta, Kishan, Aashish Raj and Rohit Dutta
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Focus
We defined the explicit subsidies and estimated the burden of explicit subsidies on State Finances for eight selected States.
Analysis of States’ Debt and Bond Markets
- Start date Sept., 2023
- Completion date March, 2024
- Sponsor The Foreign, Commonwealth and Development Office (FCDO) of the Government of the United Kingdom support for the study of India’s fiscal issues for the Sixteenth Finance Commission under Project No. 400047
- Project leader Radhika Pandey, Utsav Saksena, Madhur Mehta, Bency Ramakrishnan, Nipuna Varman and Kriti Wattal
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Focus
The report titled ‘Analysis of States’ Debt and Bond Markets’ seeks to examine issues pertaining to the State bond market in India. On the qualitative side, it explores the legislative and regulatory frameworks governing State borrowings, along with discussion around the various institutions involved, including the State Governments, the Reserve Bank of India (RBI) (States’ debt manager), the Finance Commission (FC), as well as internal departments for debt management. On the quantitative side, the report presents key stylized facts around State Development Loan (SDL) markets, including the liability profile of States (deficits and debts), ownership pattern of State Government bonds, issuances, cost of existing and new debt, andliquidity of SDLs.Some of the issues identified revolve around liquidity in the SDL market, lack of adequate variation between the cost of borrowing based on fiscal health of States, and concentrated SDL borrowings. Based on the analysis of the above issues, the report proposes some policy reforms to improve the State Government debt market and the required regulatory framework for a more efficient and functional market for State securities in India.
Bi-annual Review of Compliance of the Provisions of Madhya Pradesh FRBM Act for 2019 20 and 2020-21 (July 2023 to March 2024)
- Start date July, 2023
- Completion date March, 2024
- Sponsor Government of Madhya Pradesh
- Project leader Pratap Ranjan Jena and Abhishek Singh
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Focus
This evaluation report was prepared and submitted as part of an independent review process of State finances and compliance with the State Fiscal Responsibility and Budget Management Act (FRBM Act). The evaluation report summarized the key conclusions and lessons of fiscal management process for these two years. In addition to highlighting the State’s compliance to fiscal responsibility Act targets, the report assessed the broad trend of fiscal management. Budgetary projections relating to avenue and expenditure will be analysed keeping the outturns in consideration to assess the ability of the Government to implement the budgetary plans.
Revenue Potential of Passenger and Goods Tax (PGT) across Indian States
- Start date Sept., 2023
- Completion date March, 2024
- Sponsor The Foreign, Commonwealth and Development Office (FCDO) of the Government of the United Kingdom support for the study of India’s fiscal issues for the Sixteenth Finance Commission under Project No. 400047
- Project leader R. Kavita Rao, Sacchidananda Mukherjee
- Consultants/Other authors Shivani Badola and Vivek Jadhav
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See details
In this study, we estimate the revenue potential of States in the Passenger and Goods Tax (PGT) collection based on available information in the public domain. Taxes on Goods and Passengers (also known as Passenger and Goods Tax or PGT) is a tax on goods and passengers carried on road or inland waterways. This tax is not subsumed into the GST, except that under Entry 52 of the State List (List II of the Seventh Schedule of the Indian Constitution) “Taxes on the entry of goods into a local area for consumption, use or sale therein” has been subsumed into GST, as per the Constitution One Hundred and First Amendment Act, 2016.
How Much Debt is Optimal for the Major Indian States? Economic Growth vs. Debt Sustainability
- Start date April, 2023
- Completion date March, 2024
- Sponsor The Foreign, Commonwealth and Development Office (FCDO) of the Government of the United Kingdom support for the study of India’s fiscal issues for the Sixteenth Finance Commission under Project No. 400047
- Project leader Rudrani Bhattacharya, C. Prasanth and R. Kavita Rao
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Focus
FRBM Act 2003, amended vide the Finance Act 2018 allowed states to hold public debt up to 20 percent of GDP. In this context, the present study explores an optimal range of debt to output ratio which is conducive to economic growth and appropriate for fiscal sustainability, considering the State-level variations in economic and fiscal conditions. Based on the evidence for the period 2001-02 to 2019-20, overall, for the 18 major States in India, public debt is sustainable up to an optimal debt-GSDP ratio of 25 percent. Public debt financed spending can contribute to real economic growth beyond a threshold of 22 percent of debt-GSDP ratio and a threshold of 2 percent capex spending to GSDP ratio. The growth enhancing effect of increasing debt-GSDP ratio from the stipulated 20 percent to 25 percent would be higher in low economic growth States compared to the high economic growth States. It would raise economic growth in high social spending States, while it would not have any impact on economic growth in the low social spending States. The growth enhancing effect of increasing debt-GSDP ratio would be same for the States with both low and high share of spending on economic services.
Revenue Mobilisation from Taxes on Alcoholic Beverages
- Start date Sept., 2023
- Completion date March, 2024
- Sponsor The Foreign, Commonwealth and Development Office (FCDO) of the Government of the United Kingdom support for the study of India’s fiscal issues for the Sixteenth Finance Commission under Project No. 400047
- Project leader R. Kavita Rao, Sacchidananda Mukherjee
- Consultants/Other authors Shivani Badola and Vivek Jadhav
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Focus
State excise is the third largest source of the States’ own tax revenue (OTR), after State goods and services tax (GST) and sales tax/value-added tax (VAT) on items that are presently not attracting GST (viz., petrol, diesel, aviation turbine fuel, or ATF, crude petroleum, natural gas, and alcoholic beverages for human consumption). The tax base of state excise is the consumption of alcoholic beverages (viz., Indian manufactured foreign liquor, or IMFL, country liquor, beer) and other narcotics (opium, Indian hemp, and other narcotic drugs and narcotics) in a State. Some States also collect sales tax on alcoholic beverages in addition to State excise. Combined revenue from the State excise and sales tax on alcoholic beverages constitutes a major share of OTR. Therefore, this study could be useful for States to understand the factors influencing State excise collection from alcoholic beverages.