A study on fiscal indicators in India: With special reference to Karnataka
Dr. BN Harisha
In India, the constitutional provision would result in imbalances between revenue capacities and expenditure needs at state level. Constitution provides for the assignment of revenues, sharing of the proceeds of certain centrally levied taxes with the States and making grants to States from consolidated fund of India. States have access to their own sources of revenue and are entitled as well for a share in central taxes and other transfers. The 14th Finance Commission is of the view that tax devolution should be the primary route for transfer of resources to the States. According to the Commission, the increased devolution of the divisible pool of taxes is a compositional shift in transfers from grants to tax devolution. State finances have become a subject of Serious concern in the recent years due to the mounting fiscal distress experienced by them caused by deceleration in the resource growth and an unbridled growth in expenditure, more so of the revenue expenditure. Fiscal imbalances in Indian Federation are reported to be on the rise especially after the introduction of economic reforms. The need for transfers arises because the own revenues of a lower level government are generally insufficient to meet the expenditure required for providing services. Karnataka for long has proved to be a fiscally prudent state in comparison with many other states in the country. The State experienced a sharp deterioration in its fiscal situation after the mid 1990s into early years of 2000. The State has been experiencing the improvements in the fiscal marksmanship in the recent years. With this backdrop the present study tries to find out the best fiscal correction method through Fiscal Transfers, Expenditure Minimising Strategy and Revenue maximising technique with the help of Fiscal Federal Theories.