An autonomous research institute under the Ministry of Finance

 

Past projects

Uttar Pradesh: Medium Term Expenditure Policy

  • Completion date Jan., 2005
  • Sponsor Resource and Expenditure Commission of Uttar Pradesh
  • Project leader D. K. Srivastava
  • Other faculty C. Bhujanga Rao, Manish Gupta
  • Focus

    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.


Capacity Building in Budgetary Analyses at the State Level

  • Completion date Jan., 2005
  • Sponsor World Bank
  • Project leader Tapas K. Sen
  • Other faculty Pinaki Chakraborty
  • Focus

    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.


Gender Budgeting and its Impacts on Various Programmes

  • Completion date Jan., 2005
  • Sponsor Department of Women and Child Development (DWCD)
  • Project leader Lekha Chakraborty
  • Other faculty Kala S. Sridhar
  • Focus

    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.


Altertives to Octroi

  • Completion date Jan., 2005
  • Sponsor Government of Punjab
  • Project leader O.P. Mathur
  • Focus

    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.


Uttar Pradesh - Study of State Finances

  • Completion date Jan., 2005
  • Sponsor Planning Commission
  • Project leader D.K. Srivastava
  • Other faculty C. Bhujanga Rao, Mukesh Kr. Anand, Pinaki Chakraborty
  • Focus

    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.


Uttar Pradesh: Reforming the Budgetary System

  • Completion date Jan., 2005
  • Sponsor Resource and Expenditure Commission of Uttar Pradesh
  • Project leader D. K. Srivastava
  • Other faculty C. Bhujanga Rao, Manish Gupta
  • Focus

    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.


Capacity Building for Fiscal Reforms in Sikkim

  • Completion date Jan., 2005
  • Sponsor ADB
  • Project leader A Premchand
  • Other faculty M. Govinda Rao, Pratap Ranjan Je,
  • Consultants/Other authors N.J. Kurian, Ram Prakash Katyal, Salil Kumar Sanyal, R.K. Mishra, B.R. Atre, Sukumar Mukhopadhyaya
  • Focus

    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.


Revenue Implications of Central Tax Exemptions

  • Completion date Jan., 2005
  • Sponsor Ministry of Finance
  • Project leader R. Kavita Rao
  • Other faculty Amaresh Bagchi
  • Consultants/Other authors Bulbul Sen
  • Focus

    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.


Trends and Issues in Tax Policy and Reform in India

  • Completion date Jan., 2005
  • Sponsor Ministry of Finance
  • Project leader M. Govinda Rao
  • Other faculty R. Kavita Rao
  • Focus

    See Link


Projection of Quarterly CT and IT Receipts for the FY 2005-06 and Updated Projections of CT and IT Receipts for the FY 2005-06

  • Completion date Jan., 2005
  • Sponsor Ministry of Finance
  • Project leader A.L. Nagar
  • Consultants/Other authors Sanjay Kumar and Sayan Samanta
  • Focus

    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.


Rapid City Assessments in Support of the City Challenge Fund (Ludhiana and Rajkot)

  • Completion date Jan., 2005
  • Sponsor World Bank
  • Project leader O.P. Mathur
  • Other faculty Navroz K. Dubash, Kala S. Sridhar
  • Focus

    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.


National Urban Renewal Mission: Toolkit for formulation of a City Development Plan and Setting a Timeline for Implementing the Urban Reform Agenda

  • Completion date Jan., 2005
  • Sponsor Ministry of Urban Development
  • Project leader O.P. Mathur
  • Focus

    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.


Resource Devolution from Center to States: Enhancing the Revenue Capacity of States for Implementation of Essential Health Interventions

  • Completion date Jan., 2005
  • Sponsor Ministry of Health and Family Welfare
  • Project leader M. Govinda Rao
  • Other faculty Mita Choudhury, Mukesh Kr. And
  • Focus

    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.


Estimation of Corporate Tax for the Largest 10 percent of the Companies in Various Sectors of the Economy and Size-Wise Classification of Companies in the Indian Corporate Sector and their Gross Value Added and Corporate Tax Paid

  • Completion date Jan., 2005
  • Sponsor Ministry of Finance
  • Project leader A.L. Nagar
  • Consultants/Other authors Sayan Samanta
  • Focus

    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.


A Study of Debt Sustaibility at State Level in India

  • Completion date Jan., 2004
  • Sponsor Reserve Bank of India
  • Project leader Indira Rajaraman
  • Consultants/Other authors Shashank Bhide and P.K. Pattik
  • Focus

    Studies on debt sustaibility in India have addressed the issue at the level of the central government alone, or aggregated across centre and states, or at the aggregate level for states.Since the constituent states of the Indian union are highly heterogeneous in terms of size, level of income, and ability to raise own resources, there is a need for a state-specific assessment of debt sustaibility status. After operatiolising the alytics of debt sustaibility for subtiol governments, states are grouped and ranked by the indicators selected. The significant increase in the outstanding indebtedness and sharp increase in the average interest rate require states to carry overall primary surpluses in order to stabilise debt as a percent of GSDP. The problem is reaching crisis proportions, with states facing increasing market reluctance to absorb their securities. Fiscal correction at state level is no longer an option, but has become an imperative. The study identifies states in need of expenditure compression and improvement in own revenue collection effort, and lists other institutiol changes required, such as introduction of fiscal responsibility legislation, and participation in the Compensatory Revenue Fund and the Guarantee Redemption Fund, in order to gain fiscal credibility in fincial markets. Legislated fiscal conduct has to explicitly prohibit budgetary malpractices, such as loss cover for non-departmental state PSUs through incremental contributions to share capital from the capital account of the budget. It can be nobody’s case that states are entirely responsible for the fiscal situation in which they find themselves. In a fiscal federation, the ultimate responsibility for macroeconomic control rests with government at the tiol level. The provision for this is presently enshrined under Article 293(3) of the constitution. The coverage of this is however partial, and does not extend to borrowing against small savings collections, or direct borrowing from the public through small savings schemes floated by the state government. It is only when the coverage of Article 293(3) comprehensively extends to all avenues of possible borrowing that ebling conditions for unsustaible debt paths will have been elimited. These recommendations have been adopted in the Report of the Twelfth Fince Commission.


Central Budgetary Subsidies in India

  • Completion date Jan., 2004
  • Sponsor Ministry of Finance, Government of India
  • Project leader Surender Kumar
  • Other faculty Tapas K. Sen
  • Consultants/Other authors N.J. Kurien and A.K. Halen
  • Focus

    Using essentially the same methodology that has been developed at the Institute over the years, the study first estimates the amount of subsidies – in the sense of unrecovered costs – given by the central government on various types of services provided. This is done for two years, 2002-03 (accounts data) and 2003-04 (provisiol data). The subsidies are estimated for each service (by major heads in most cases) and also for three groups under Merit I, Merit II and non-Merit services. It examines three types of subsidies in some detail – on food, fertilizer, and petroleum – that account for a large part of the central subsidies, along with an assessment of a number of schemes initiated by the central government for poverty alleviation. The main focus of the detailed alyses based on available literature is on the success of these subsidies/schemes in reaching the target group of the poor and on suggesting reforms that would enhance the targeting. Using this study report as the main input, the Ministry of Fince tabled a report on the subject in the Parliament in December 2004.

  • See details

    Read and Comment on Full Report


Joint Estimation of Corporate Tax from Manufacturing, Mining, Electricity and Service Sectors of the Indian Economy

  • Completion date Jan., 2004
  • Sponsor Ministry of Finance
  • Project leader A. L. Nagar
  • Consultants/Other authors Sanjay Kumar and Rajorshi Sen Gupta
  • Focus

    The CMIE data has been used to alyse CT accruing from a panel of four sectors (manufacturing, mining, electricity, and services) for 14 years 1989-90 to 2002-03. Since the four sectors are simultaneously affected by the general economic conditions prevailing in the country and by changes in government policies, it is assured that individual sectors do not operate in isolation and independently of each other. Accordingly Seemingly Unrelated Regressions (SUR) method for estimating the system of regressions has been used. CT has been estimated from individual sectors in terms of (i) PBT (profit before tax) both actual and estimated; and (ii) the upper bracket statutory tax rate. For manufacturing sector PBT has been estimated in terms of - infrastrucure, sales, Interest payments, debt equity ratio and depreciation. For other sectors in terms of – infrastructure, -sales and bank rate of interest.


Restructuring Public Finances of Tripura

  • Completion date Jan., 2004
  • Sponsor Government of Tripura
  • Project leader Indira Rajaraman
  • Other faculty Lekha S. Chakraborty
  • Consultants/Other authors Deepti Jain
  • Focus

    The worsening of fiscal indicators since 1999-00 called urgently for a fiscal reform programme, aligned with a fiscal responsibility bill. A draft Fiscal Responsibility Bill was designed and fully drafted, scheduled to come into operation on April 1, 2005, and ending on March 31, 2010. This was fully coterminous with the award period of the Twelfth Fince Commission and anticipated the requirement placed by the TFC on all states. Annual path limits on the revenue deficit are specified in the form of two options. The choice between these options is vested with the state government. Simulations of expenditure compression under the two options are performed to eble the choice. The report also examines the debt swap scheme of the Government of India (GoI), in which Tripura has been a participant. Since the interest bill itself accounts for only 15 percent of revenue expenditure in Tripura, fiscal restructuring efforts have to be focused largely on non-interest expenditure, and on own revenue, both of which do fall entirely within the control of the state. The report makes a number of suggestions in respect of both these imperatives. The report also evaluates the debt swap scheme of the centre; examines avenues for enhancement of own revenue; and estimates staff redundancy by department. Filly, the report examines nineteen non-departmental PSUs, and suggests reform measures for each including, but not confined to, manpower reduction.


India- Fiscal Reform for Poverty Reduction

  • Completion date Jan., 2004
  • Sponsor Cadian Intertiol Development Agency (CIDA)
  • Project leader D.K. Srivastava
  • Other faculty Pinaki Chakraborty, C. Bhujanga Rao
  • Consultants/Other authors S.K. Sanyal
  • Focus

    The study aimed at creating and promoting sustained reduction in poverty levels in India by improving the efficacy of fiscal policies in the provision of vital social and economic services, in terms of their impact on poverty reduction. In this study, poverty has been viewed in a comprehensive sense, involving not only income or nutritiol thresholds but also issues of access to services like education, health, water, and security. With increasing globalization of the Indian economy, and greater reliance on market forces, fiscal intervention becomes critical for combating trends towards increasing spatial concentration of poverty. The study has examined poverty issues in India focusing on four high poverty-incidence states, viz., Uttar Pradesh, Madhya Pradesh, Uttaranchal, and Chhattisgarh, where an extensive primary survey was undertaken canvassing household level and village level questionires. Although the incidence of poverty in India, measured by the head count ratio, has fallen by about 30 percentage points during the last 30 years, it has become regiolly more concentrated and urbanized, and in all the four states studied, more than 40 percent of the poor were found to be below 18 years of age. Gender discrimition, in terms of sex ratio and female literacy rate, is significant and in some cases rises as the incomes of the poor increase. New policy initiatives are needed to address this problem. The system of centrally sponsored schemes needs to be overhauled and involvement of Panchayati Raj Institutions in implementing these schemes should increase substantially. The study calls for focus on employment generation schemes, better targeted fiscal intervention, and emphasis on health and education as long term antidotes to poverty.


Assam Governance and Public Resource Management Program

  • Completion date Jan., 2004
  • Sponsor Government of Assam
  • Project leader M. Govinda Rao
  • Other faculty R. Kavita Rao and P.R. Jena
  • Focus

    The objective of the project is to help Government of Assam design reforms in the area of resource magement and governce and strengthen its capacity to implement them. Major areas of the project are fiscal reforms that include improvement in resource mobilisation, public expenditure magement reforms to strengthen fiscal discipline, debt magement, and budgetary reforms, and improvement in governce and public magement to introduce cost-effectiveness and sustaibility of reforms. Fiscal reforms are critical to accelerating growth, reducing poverty, and achieve the millennium development goals of human development and gender equity.


Projection of Quarterly Corporate and Income Tax Collections

  • Completion date Jan., 2004
  • Sponsor Ministry of Finance
  • Project leader A. L. Nagar
  • Consultants/Other authors Sanjay Kumar and Dev Ashish
  • Focus

    Suga’s model has been used to estimate quarterly tax receipts and annual tax collection at the end of each quarter for the period 1994-95 to 2003-04 for which actual tax receipts data are available.

    Projections of tax receipts for 2004-05 have been made by using projected values of the ratio of effective average tax rate in 2004-05 to the actual in 2003-04.


Public Expenditure for the Poor in Andhra Pradesh

  • Completion date Jan., 2004
  • Sponsor DFID, India
  • Project leader Tapas K. Sen
  • Other faculty Diwan Chand
  • Focus

    The study aimed at examining the recent trends in government expenditure with respect to those directly aimed at poverty alleviation, economic growth in general, and indirect poverty alleviation and expenditures on general services. The study found no radical change in the allocation to these three types of expenditure over the four-year period 2000-2004. There was, however, some evidence of general services gradually claiming a greater share mainly at the cost of the more growth-oriented public expenditures.


Estimation of Corporate Tax from the Manufacturing Sector of the Indian Economy

  • Completion date Jan., 2004
  • Sponsor Ministry of Finance
  • Project leader A. L. Nagar
  • Consultants/Other authors Sanjay Kumar and Rajorshi Sen Gupta
  • Focus

    Disaggregation of corporate tax (CT) according to the source of accrual may be useful in improving the precision of forecasts. In this paper, CT from the manufacturing sector in terms of level of profits (actual/estimated), contribution of the manufacturing sector to GDP and the upper bracket statutory corporate tax rate are estimated. The study shows that a 1 % increase in profits would lead to 0.34% increase in CT, a 1% increase in the contribution of manufacturing to GDP would result in 0.58% increase in CT and a 1% decrease in statutory tax rate has a positive effect on CT of the order of 0.44%.


Forestry Poverty Linkage Model for India

  • Completion date Jan., 2004
  • Sponsor JBIC
  • Project leader Gopinath Pradhan
  • Consultants/Other authors Subrata Mandal, Manish Gupta
  • Focus

    The study alyses the relationship between forestry and poverty alleviation in a village level Social Accounting Matrix (SAM) for two contrasting ecological zones in India located in the Shivalik region of the Himalayas and the arid region of Aravalli dunes. It takes into account the flow of input and output, including monetised values of the environmental goods and exterlities of all major rural activities and the accrual of income, consumption, savings, trade of different income classes of the village. The accounting framework also includes human health cost related variables across income classes to take into account the quality of life The study then derives accounting, fixed and mixed multipliers to explain the relationship between forestry and poverty. The study filly suggests policy recommendations for poverty alleviation though forestry programmes.


Financing Human Development in Karnataka

  • Completion date Jan., 2004
  • Sponsor UNDP and Government of Kartaka
  • Project leader M. Govinda Rao
  • Other faculty Mita Choudhury
  • Focus

    This paper alysed the problems of state finces in Kartaka and the constraints posed on fincing human development in the state. The alysis shows that adequate allocation to human development expenditures in the 1990s has been seriously constrained by the steadily deteriorating fiscal health of the state. Although a high growth rate in the state has led to an increase in per capita expenditures in the social sector and human priority areas, there has been a decline in social allocation and human priority ratios in the state in the 1990s. The declining trend in these ratios has posed a challenge to achieving the millennium development goals and targets set out for the Tenth plan. Expenditures by local government in the state have also been segmented, idequate, and unequally distributed. Although Kartaka is likely to meet certain human development targets in the Tenth plan in urban areas, public expenditure needs to be focused towards rural areas, in particular towards the backward districts of the state where human development indicators are far below the targets.


India’s Municipal Sector

  • Completion date Jan., 2004
  • Sponsor Twelfth Finance Commission
  • Project leader O.P. Mathur
  • Consultants/Other authors Sandeep Thakur
  • Focus

    This study undertaken for the Twelfth Fince Commission (TFC), examined the fiscal performance of municipalities in different states and seeks explations for their differential performance. Additiolly, it assesses the load on state finces on account of implementation of the recommendations of the Fince Commissions of States (SFCs). It also indicates options for the TFC on how it might contribute to improving the finces and functioning of municipalities.


Estimation of Revenue Implications for States on Introduction of Value Added Tax

  • Completion date Jan., 2004
  • Sponsor Twelfth Finance Commission, Government of India
  • Project leader Pinaki Chakraborty
  • Consultants/Other authors Ujjaini Datta
  • Focus

    The study alysed the possible revenue loss in the event of introduction of value added tax at sub-tiol level in India for two states, viz., Andhra Pradesh and West Bengal. The study suggested that, under the proposed implementable VAT design, the revenue loss to both the states is insignificant when the reform envisages intra-state VAT. However, when the reform includes phasing out of the Central Sales Tax, there would be revenue losses and it is necessary to find appropriate mechanism to compensate the loss.


Rural Fiscal Decentralization in Kartaka State

  • Completion date Jan., 2003
  • Sponsor World Bank
  • Project leader M.Govinda Rao
  • Other faculty H.K. Amar Nath
  • Consultants/Other authors B.P. Vani
  • Focus

    A major shortcoming in Indian fiscal literature is the lack of attention to fiscal issues at local levels, particularly in rural areas. Much of the literature on fiscal decentralization is focused on fiscal arrangements between the centre and the states. Very little is known about public finces of Panchayat Raj institutions and fiscal relationship between state and Panchayat Raj institutions at district, block and village levels. The few studies that look at these issues are descriptive and impressionistic and are not based on reliable data.

    This study is an attempt to undertake a comprehensive alysis of sub-state rural fiscal decentralization and Panchayat finces in Kartaka. It critically examines the delegation of functions in terms of various schemes and recommends reform options in consolidating the schemes. The alysis also shows virtual non-existence of fiscal autonomy at district and block levels. The alysis of own revenues, expenditures and transfers at the village level, based on the primary data collected from 636 village panchayats brings out very interesting insights. The study makes a number of reform proposals to enhance own revenues, redesign transfers and improve efficiency of expenditures.


Forecasting Income Tax and Corporate Tax Revenues

  • Completion date Jan., 2003
  • Sponsor Ministry of Finance
  • Project leader A.L. Nagar
  • Focus

    Actual and estimated values of Corporate Tax and Income Tax have been compared and simulated forecasts obtained for 2003-04 and 2004-05.


Budgetary Subsidies in India: Subsidising Social and Economic Services

  • Completion date Jan., 2003
  • Sponsor Planning Commission
  • Project leader D.K. Srivastava
  • Other faculty Pinaki Chakraborty, C. Bhujanga Rao
  • Consultants/Other authors T.S. Rangamannar
  • Focus

    This study assigned by the Planning Commission revisits the issue of budgetary subsidies in India and provides an estimate of the implicit budgetary subsidies in 1998-99 both for the centre and each of the 25 states and also combined estimates for the centre and the states. It discusses critical policy issues and suggests a reform framework. For the centre, the subsidies were estimated at Rs.79,828 crore amounting to 4.59 percent of GOP (at current market prices) and constituting 53 percent of the net revenue receipts. Of this, social service subsidies were estimated at Rs. 14,908 crore and economic service subsidies at Rs. 64,920 crore. While subsidies are shown for each state separately, the subsidies for all the states taken together amounted to RS.I ,55,923 crore. Of this, social services accounted for- 48.9 percent or Rs. 76,135 crore and economic services for 51.1 percent or Rs. 79.789 crore. As percentage of combined CSOP of all states. the subsidies of states taken together amounted to 11.11 percent of which the share of social services was 5.42 percent and of economic services 5.68 percent. Subsidies for the country as a whole (excluding inter-governmental adjustments) work out to Rs.2,35.752 crore or 13.54 percent of COP. The share of social services was 5.23 percent and of economic services 8.31 percent. This study has made a refinement about the categorisation of the subsidies according to the nature of the head under which subsidies were provided, viz., merit I, merit 2 and non-merit both-under social and economic services and for the centre and the states. This conceptual distinction suggests that while the merit subsidies are justified, non-merit subsidies do not commend themselves for such a treatment. The study has focused on a package of measures for reforming the subsidy regime both at the centre and states.


Financing Municipal Services Reaching Out To Capital Markets

  • Completion date Jan., 2003
  • Sponsor UNDP
  • Project leader Om Prakash Mathur
  • Consultants/Other authors Sanjukta Ray
  • Focus

    Accelerating the flow of investible resources into urban infrastructure and services, viz., water supply, sewerage and wastewater disposal systems, solid waste collection, treatment and magement, citywide roads, and street lighting is central to India’s economic growth and poverty reduction agenda. Current investment levels in urban infrastructural services, estimated at about 2.25 to 2.50 per cent of the total development budget, are far too low in relation to the requirements, with no sigls that these levels will be stepped up in the short run. Indeed, fiscal adjustment aimed at reducing budget deficit may force a cutback in public investments in infrastructural facilities. What altertives exist for spurring investment into urban infrastracture services? Taking note of the emergence of a capital (debt) market in the country and its sensitivity to meeting the infrastructural needs of municipalities as is demonstrated by the examples of Ahmedabad, Bangalore, Hyderabad, Indore, Ludhia, Madurai, gpur, shik, and more recently, Thane, and simultaneously examining as to what makes some municipalities to gain access to the capital market and other municipalities to continue to rely on state government grants and loans, this study entitled Fincing Municipal Services Reaching Out to Capital Markets provides a framework for municipalities to assess their creditworthiness for tapping the scent but expanding capital market for fincing urban infrastructural services.


Inputs towards the Memorandum to the Twelfth Finance Commission of the Government of Chhattisgarh

  • Completion date Jan., 2003
  • Sponsor Government of Chhattisgarh
  • Project leader Kavita Rao
  • Focus

    The report sought to highlight the features special to the state of Chhattisgarh, which have an adverse impact on its fince, by way of higher cost of delivery of services and/or lower realisations in the form of tax and non-tax revenue. A principal feature of the state that contributes adversely in this manner is the forest cover. The state is expected to protect and conserve the forests in the larger interest of the country. This process involves not only a direct cost of conservation, but also an indirect cost in terms of poorer resource use, lower incomes, and hence lower tax as well as non-tax realisations. On the other hand, lower density of population implies higher costs of providing basic services to the population. A basis for correction for this disability was proposed. Another interesting feature of the report is exploring altertive approaches for disbursing allocations towards calamity relief, where a case was made for increased emphasis on drought as a calamity and a re-think proposed, on the basis for allocation of this amount among the states, with greater emphasis on drought proneness, however it be measured.


Revenue Implications and Economic Impact of Introduction of VAT in Assam

  • Completion date Jan., 2003
  • Sponsor Government of Assam
  • Project leader M.C. Purohit
  • Other faculty Gautam Naresh, Ajay K. Halen
  • Focus

    Sales tax is one of the most important state taxes in Assam, yielding over 65 percent of its own revenue with central sales tax (CST) contributing about 20 percent of total sales tax revenue. However, the overall low performance of sales tax revenue has called for its reform. This study has recommended that introduction of VAT would immensely benefit the state as VAT is not only a buoyant source of revenue, but would also be efficient. The reforms necessary to strengthen the organisation for efficient administration of VAT to be adopted prior to its introduction include adequate client services to promote voluntary compliance; identify stop filers and defaulters; and maintain low administrative and compliance costs. Magement information system is yet another key to tax administration. It is suggested that recent advances in the field of information technology be grafted in the areas of VAT magement in Assam. The introduction of VAT would impact state’s own tax revenue in three ways, mely, (I) extension of the tax base into stages subsequent to the first-point up to the retail stage; (ii) providing set off on tax paid on inputs and in previous stages; and (iii) changes in the structure of tax rates. The study also attempts to estimate revenue neutral rate (RNR) and the likely combined losses of revenue, if the agreed RNR of 12.5 percent is adopted. It has also been identified that in addition to having revenue implications for the state, VAT would have direct as well as indirect impacts on several macroeconomic variables.


Urban Water Pricing Setting the State for Reforms

  • Completion date Jan., 2003
  • Sponsor UNDP
  • Project leader Om Prakash Mathur
  • Consultants/Other authors Sandeep Thakur
  • Focus

    Setting appropriate prices is indispensable to providing adequate water to India’s growing urban population. Water in most Indian cities and towns is underpriced, with damaging long-run consequences for households who have limited and poor quality water services and for water supplying entities who are uble to invest and expand water coverage. Most water supply entities – be these the Public Health Engineering Departments (PHED), state or city- level water boards, or municipal governments, run at a loss, and cover the loss – defined as the gap between revenues from the sale of water and cost of water provision – from government subsidies and accelerated depreciation of capital. The result is a low- level equilibrium low tariff, poor services, and constraints on access, especially of poor households. While the need for appropriate pricing of urban water has been long stressed and is widely recognized as central to broader urban sector reforms, what constitute water price reform remains an elusive and emotive issue. Moreover, the goals and objectives of water pricing are often conflicting. Using city- level experiences of water pricing, particularly in respect of the size of the consumer base, multiple instruments of charging, price discrimition between different water user groups, and price-cost linkages, this study titled as Urban Water Pricing Setting the Stage for Reforms , provides a framework that spells out key areas of reform, objectives that may govern water pricing, and parameters of tariff ratiolization.


A Review of Options for Revenue Neutral Rates of VAT for Orissa and Advice on Design of VAT and Administration Procedures

  • Completion date Jan., 2002
  • Sponsor DFID
  • Project leader Pawan K. Agarwal
  • Other faculty Pratap R. Jena
  • Consultants/Other authors Jeeta Mohanty
  • Focus

    The study is planned to provide guidance on design of VAT for Orissa. Accordingly, it is focused on identifying features of the system of sales tax in Orissa impacting upon the value added tax (VAT) base, developing methodology for computing revenue neutral rates (PNRs) of VAT, and computation of PNRs of VAT with altertive feasible options of VAT design for Orissa, The altertive options are designed to explore the impact of removal of central sales tax (CST), zero rating of all inter-state transactions, and altertive VAT thresholds on the PNR of VAT.


Revenue Estimates for a Panchayat-Ievel: Crop-Specific Levy

  • Completion date Jan., 2002
  • Sponsor
  • Project leader Indira Rajaraman
  • Consultants/Other authors Nilabja Ghosh
  • Focus

    This paper calculates per hectare rates of levy for a land-based crop-specific agricultural tax on eight major field crops, based on published cost of cultivation data, now available at state-level for the nineties but with uneven coverage across states. The eight crops are paddy, wheat, groundnut, rape/mustard seed, sugarcane, cotton, potato, and onion. Clearly, any reconfiguration of input subsidies presently available to agriculture will alter the taxable surplus parameters and levy rates estimated, but the method used is of perfectly general applicability. The state-level rates of levy calculated for the year 1996-97 yield an estimated tax revenue of Rs 500 crore, around 80 percent of aggregate land revenue collected that year from agricultural land. The levy is envisaged for panchayat rather than state-level, with jurisdictional retention for infrastructure improvements within agriculture. District-level rates of levy, with taxable surplus parameters adjusted for crop yield variations across districts, are calculated for four selected states: Andhra Pradesh, Punjab, Rajasthan, and West Bengal. Revenue additionality at panchayat level as a percent of own revenue collections, aggregating across all panchayat tiers, ranges between 30 percent in Andhra, and 201 percent in West Bengal.


A Study of State Fiscal Reforms in Manipur

  • Completion date Jan., 2002
  • Sponsor Government of Manipur
  • Project leader Ashok Lahiri
  • Other faculty Saumen Chattopadhyay
  • Consultants/Other authors O.P. Bohra, E. Bijoy Kumar Singh
  • Focus

    Fiscal situation in the state of Manipur is both precarious and unsustainable. The economy is overwhelmingly dependent on the state government for developmental activities and the government. in turn. depends crucially on the centre for resources. The challenge in Manipur lies in breaking the vicious cycle of underdevelopment. militancy. and dependency. The study adopts a comprehensive analysis of the state's developmental potential to identify areas of possible fiscal reform. It further suggests both short-term fiscal measures to tide over the fiscal crisis and medium term development strategies to ensure balanced development of the state economy. The fiscal reform package includes expenditure rationalisation. resource mobilisation. and restructuring of the state level public sector enterprises. The development strategy emphasises upon collective effort with people's participation in developmental activities and an exemplary level of governance with a view to improving the effectiveness of the government in the delivery of public goods and services.


Gender Budgeting in India

  • Completion date Jan., 2002
  • Sponsor UNIFEM; Ministry of HRD
  • Project leader Ashok Lahiri
  • Other faculty Lekha Chakraborty
  • Focus

    The study aims at a diagnosis of the existing degree of gender-inequality in India through gender-segregation of the relevant macrodata; valuation of the existing non-NAS unpaid work of women; and gender-disaggregated benefit incidence analysis of public expenditure. and to prescribe policy suggestions to build a gender-sensitive national budgeting process.


Punjab Expenditure Reforms Commission Report

  • Completion date Jan., 2002
  • Sponsor Government of Punjab
  • Project leader Ashok Lahiri
  • Other faculty R. Kavita Rao
  • Focus

    The report examines the dimensions of fiscal correction required for the state of Punjab and implied correction in levels of expenditures, given the feasible potential for revenue mobilisation. Given the targets so derived at the aggregate level. the report suggests the need for containing the size of public sector employment and provides some estimates of the fiscal impact of a VRS programme over a medium-term, establishing the viability of such a programme, Following up on this initiative, the report proposes an alternative way of organisation of business in a few import sectors of state, specifically, education, PWD (roads and bridges). health. Irrigation police services. state road transport. and power.


The Income Tax Compliance Cost of Indian Corporations

  • Completion date Jan., 2002
  • Sponsor Planning Commission
  • Project leader Arindam Das-Gupta
  • Other faculty Saumen Chattopadhyay
  • Consultants/Other authors Dheeraj Bhatnagar, Jeeta Mohanty, Sachchidananda Mukhopadhyay, Surendra Prakash Singh
  • Focus

    Income tax compliance costs for companies are costs they incur in meeting their obligations under the income tax law including costs associated with tax planning and opportunity costs arising out of delayed tax refunds. Gross compliance costs of company income taxation based on a sample of 45 companies in India for 2000-01 are estimated to be between 5.6 and 14.5 percent of corporation tax revenues. However, tax deductibility of legal expenses and cash flow benefits result in net compliance costs to companies between minus 0.7 and plus 0.6 percent of corporation tax revenue are at around 2 percent. if opportunity costs are included. Costs are regressive and are negative mainly for larger companies. Tardy refunds. budget process and the frequency of administrative notifications along with tax ambiguity and complexity are the main contributors to compliance costs. Some of the reform suggestions include streamlining refund procedures, improving taxpayer services and tax enforcement, reducing discretionary powers of tax officials, reducing costs of policy environment by reforming the budget process, and the issue of administrative notifications.


The Personal Income Tax in India: Compliance Costs and Compliance Behaviour of Taxpayers

  • Completion date Jan., 2002
  • Sponsor Planning Commission
  • Project leader Arindam Das-Gupta
  • Other faculty Saumen Chattopadhyay
  • Focus

    Major findings show that there appears to be a relationship between some components of compliance costs, including bribes and compliance. which exert a negative effect on tax revenue. Money compliance costs. bribes. and use of tax advisers were found to affect compliance adversely. However, the opposite is true for third party costs via the TDS. Time costs may, also positively affect compliance. For non-filers. a theoretical model was developed to study the impact of compliance costs on return filing behaviour. Implementation of a more extensive TDS. reducing the scope for avoidance, closer regulation of tax practitioners, increased automation of taxpayer records. and improved use of third party information are some of the important policy recommendations of the study.


A Review of Options for Revenue Neutral Rates of VAT for Andhra Pradesh and Advice on Design of VAT and Administration Procedures

  • Completion date Jan., 2002
  • Sponsor DFID, India
  • Project leader Pawan K. Agarwal
  • Focus

    The study highlights salient features of the system of sales tax in Andhra Pradesh. and of an ideal system of value added tax (VAT). It also identifies features of the former impacting upon the base. specifies methodology for computing revenue neutral rates (RNRs) of VAT. and works out RNRs of VAT with alternative feasible options of VAT design for the state of Andhra Pradesh. Alternative options have been designed to explore the impact of removal of central sales tax (CST), zero rating of all inter-state transactions, and alternative VAT thresholds on RNRs of VAT. The study reveals that it is feasible for the Government of Andhra Pradesh to adopt an ideal VAT (that is. with zero-rating of exports and all inter-state transactions including inter­state branch/consignment transfers, and with removal of CST), but with special additional tax on a few goods of demerit, without sacrifice in revenue. The required RNR of VAT need not exceed 12.5 percent.


Refinery Upgradation, Environmental Sustainability, and Cost Sharing

  • Completion date Jan., 2002
  • Sponsor EPU
  • Project leader Ramprasad Sengupta
  • Other faculty Subrata Mandal
  • Focus

    The report covers the following aspects:

    - investment and cost implication for upgrading of selected refineries in India for producing automotive fuels conforming to euro norms;

    - implications of differentials in environmental standards for products across locations;

    - impact of upgradation on competitiveness of refineries with different vintages of technology and capacity;

    - pricing option for differential environment quality in the light of international experience; and

    cost sharing for quality upgradation among stakeholders.


Estimating Industrial pollution in India: Implications for an Effluent Charge

  • Completion date Jan., 2002
  • Sponsor Ministry of Environment and Forests
  • Project leader Rita Pandey
  • Consultants/Other authors Som Sankar Ghosh
  • Focus

    Pollution from industries constitutes a considerable part of the total pollution in India. But reliable information on the nature and level of emissions by plants/factories is not available. This makes it difficult for regulators to come up with cost effective strategies - for industrial pollution control. Therefore, the need is to adopt alternative ways for estimation of environmental parameters as complements to direct measures of such parameters at the firm level. This report uses one such alternative of estimating these parameters from information on pollution intensities and abatement costs from secondary sources. The study suggests introduction of a water pollution charge and recommends that the regulator should prioritize monitoring effort and allocate monitoring resources more efficiently by targeting industries characterized by relatively high effluent discharges and low costs of pollution abatement.


Finances of Governments and their Capacity to Spend

  • Completion date Jan., 2002
  • Sponsor IDFC
  • Project leader Tapas K. Sen
  • Focus

    This paper deals with the continuing difficult position of government finances at the state level. The genesis of these problems. and their consequent inability to spend on developmental activities in general. and more specifically on the heavily needed infrastructure facilities. The study discusses recent developments in this area and provides broad suggestions for reform.


Improving Sub-national Fiscal Responsibility in the Federal Context of India

  • Completion date Jan., 2002
  • Sponsor IDFC
  • Project leader Tapas K Sen
  • Focus

    This paper published in the India Infrastructure Report 2003, deals with the problem of the heavy debt burden of the states in India and suggests institutional changes to limit the incentives for over-borrowing by states, and to minimise indiscriminate borrowing.


Fiscal Discipline at the State Level: Perverse Incentives and Paths to Reform

  • Completion date Jan., 2002
  • Sponsor World Bank
  • Project leader Amaresh Bagchi
  • Other faculty Tapas K. Sen, Mukesh Anand
  • Focus

    This study was sponsored by the World Bank along with some other studies for the conference on India: Fiscal Policies to Accelerate Economic Growth, held at New Delhi during May 21-22, 2001. It considers the issue of the persistently worsening fiscal imbalance at the state level, identifies long- and short-term contributory factors and the accommodating institutional setup. Among the corrective measures, it highlights ways of keeping a check on sub-national indebtedness as an option not given adequate coverage in Indian literature. This study advocates a mix of administrative rules-based and market­ based control of subnational debt, arguing that exclusive reliance on anyone type of control will probably neither be feasible, nor effective.


India: Local Finance Data System

  • Completion date Jan., 2002
  • Sponsor Ministry of Finance
  • Project leader O.P. Mathur
  • Consultants/Other authors Sandeep Thakur, Anil Yadav, and Ranjha Sengupta
  • Focus

    Undertaken at the instance of the Ministry of Finance (Government of India), the study has reviewed the system of classification of budget and accounts of municipal governments, and made recommendations on a new system of classification for maintaining municipal accounts. The proposed system is in conformity with similar systems existing at other governmental levels, and is able to highlight the financial position of local governments.

    The study was guided by three main considerations

    it lacked standardisation with the result that it was not able to provide a comparable assessment of the finances of municipal governments;

    there existed no system in the country for regular collection and maintenance of local finance data.


Assam: Study of State Finances

  • Completion date Jan., 2002
  • Sponsor Government of Assam
  • Project leader D.K. Srivastava
  • Other faculty C. Bhujamga Rao, Mukesh Kumar Anand, Pinaki Chakraborty
  • Consultants/Other authors S. Rangamannar
  • Focus

    The development of Assam is critical for the development of India's northeast. Assam alongwith other north-eastern states shares the problems of remoteness, and hilly terrain with associated high transportation costs. Assam's finances are vulnerable to the interplay between inherent weaknesses in the economy and critical exogenously driven fiscal shocks. Assam has already experimented certain fiscal reforms which had partially succeeded upto 1998-99. Subsequently, with growing expenditures, the state has landed in an unprecedented fiscal crisis. Fiscal deficit as a proportion to GSDP was as large as 7.25 percent of fiscal deficit for current expenditures.

    This study provides two sets of projections. The first set indicates the implication of continuation of the existing trends. Without reforms, the debt to GSDP ratio rises to about 52 percent and fiscal deficit becomes as large as 8.5 percent, highlighting the need for urgent reforms. In the second set, the study suggests an eleven fold reform package covering areas ranging from taxation, improving recoveries in non-tax revenue, salary and pension reform, reforms in subsidy with better targeting, reforming planning strategy, debt management and control, augmentation of capital expenditure relative to GSDP, restructuring public enterprises, target based control of revenue and fiscal deficits, besides budgeting reforms.