An autonomous research institute under the Ministry of Finance

 

Past projects

A Database on Customs Tariff and Tariff Bindings for SAARC Countries

  • Completion date Jan., 2001
  • Sponsor Ministry of Commerce
  • Project leader Pawan K. Agarwal
  • Other faculty V. Selvaraju
  • Consultants/Other authors Paulorni Bhattacharyya, P James Daniel Paul
  • Focus

    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.


Budgetary Subsidies to Health Sector Among Selected States in India

  • Completion date Jan., 2001
  • Sponsor NIPFP
  • Project leader V. Selvaraju
  • Focus

    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.


Capacity Building on Fiscal Devolution in Sri Lanka: Some Tax Issues

  • Completion date Jan., 2001
  • Sponsor UNOPS
  • Project leader Pawan K. Aggarwal
  • Focus

    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.


Royalties on Petroleum Crude

  • Completion date Jan., 2001
  • Sponsor Ministry of Petroleum and Natural Gas
  • Project leader Ashok Lahiri
  • Other faculty Tapas Sen, Gautam Naresh
  • Consultants/Other authors A.K. Halen
  • Focus

    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.


Time-Series Properties of State-level Public Expenditure

  • Completion date Jan., 2001
  • Sponsor Punjab Expenditure Commission
  • Project leader R. Kavita Rao
  • Other faculty Hiranya Mukhopadhyay
  • Focus

    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.


Infrastructure Development Index: An Analysis for 17 Major Indian States 1990·91 to 1994-95

  • Completion date Jan., 2001
  • Sponsor ICSSR
  • Project leader A.L. Nagar
  • Consultants/Other authors Sudip Ranjan Basu
  • Focus

    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.


Subsidies and the Environment: With Special Reference to Agriculture in India

  • Completion date Jan., 2001
  • Sponsor World Bank - IGIDR
  • Project leader Rita Pandey
  • Other faculty D.K. Srivastava
  • Consultants/Other authors Madhumita Dutta, Susmita Dasgupta
  • Focus

    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.


Non-Performing Loans of PSU Banks: Some Panel Results

  • Completion date Jan., 2001
  • Sponsor RBI Unit, NIPFP
  • Project leader Indira Rajaraman
  • Consultants/Other authors Garima Vasishtha
  • Focus

    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.


Study of Sales Tax System of Indian States and Preparations for Introduction of Value Added Tax

  • Completion date Jan., 2001
  • Sponsor
  • Project leader Mahesh C. Purohit
  • Focus

    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.


Growth-Accelerating Fiscal Devolution to the Third Tier

  • Completion date Jan., 2001
  • Sponsor The World Bank
  • Project leader Indira Rajaraman
  • Focus

    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.


Infrastructure Development Index: An Analysis for 17 Major Indian States

  • Completion date Jan., 2001
  • Sponsor ICSSR
  • Project leader A.L. Nagar
  • Focus

    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 .


Reform Programme for Rajasthan

  • Completion date Jan., 2000
  • Sponsor Govt. of Rajasthan
  • Project leader Tapas Sen
  • Other faculty V. Selvaraju
  • Consultants/Other authors Amab Mukherji
  • Focus

    After assessing the current situation in general and recent policy initiatives in particular, the report chalks out a reform programme for the state that is designed to meet the identified problems, and alleviate the financial bur­den on the state government.


State Surcharges on Petroleum Products

  • Completion date Jan., 2000
  • Sponsor Ministry of Petroleum and Natural Gas
  • Project leader Ashok Lahiri
  • Other faculty Tapas K. Sen
  • Consultants/Other authors Abhay Tripathi
  • Focus

    The Ministry of Petroleum set up a committee of three members (the authors of this report) in September, 1999, to examine the State Surcharge Scheme applied to controlled petroleum products. The committee was required to suggest necessary changes in the extant system in view of the ongoing decontrol of the petroleum sector, in general, and specifically the emer­gence of large standalone refineries. The state surcharge scheme essentially prevented tax exportation, using the administered pricing mechanism employed by the Oil Coordination Committee. The final report examines the history and details of the scheme, assesses the magnitude of the problem - particularly with reference to the impending decontrol of the sector - and recommends modifications keeping in view its practical feasibility and suitabil­ity as a precursor to the dismantling of administrative pricing.


Tariff Policy in Indian Hotels

  • Completion date Jan., 2000
  • Sponsor Hotel Association of India
  • Project leader Ashok Lahiri
  • Other faculty Hiranya Mukhopadhyay, R. Kavita Rao
  • Consultants/Other authors Dipankar Purkayastha
  • Focus

    The primary objective of the study is to investigate pricing policies of Indian hotels and to examine their implications on the industry on one hand, and on tourism and the Indian economy, on the other. At present a number of hotels quote two official prices for any given category of room a rupee price for the Indian client and a dollar price for the foreign client. The study aims at examining the optimality of the tariff structure and the need, if any, for a changeover from the dual tariff structure to single tariff in regard to the future full convertibility of the rupee. In addition, it also tries to analyze the current pattern of the central and state taxation policies, especially those pertaining to the expenditure tax and luxury taxes impacting the hotel industry, and to suggest a rational tax structure.


Taxation of Non-Fuel Mineral Sector in India

  • Completion date Jan., 2000
  • Sponsor Department of Mines; Government of India
  • Project leader J.V.M. Sharma
  • Other faculty Gautam Naresh
  • Focus

    The mineral sector, an important segment of the Indian economy, is completely dominated by the public sector. This study enlisted various taxes and levies by all levels of government in India and analyzed the impact of the overall tax regime on the mineral sector with a view to suggesting possible reforms. For designing a tax regime, the specific issues that need to be resolved are (i) how much to tax; (ii) how to coordinate the two roles of the government- one as the owner of the mineral resources, and the other as an agent responsible for achieving economic and social development; (iii) whether a separate tax regime is needed for the mineral sector; and (iv) how to combine different levies in a multi-levy system. The profile of the major taxes and non-taxes in India, levied by all the three tiers of government - central, state, and local reveals that they are corporate income tax, union excise duties and custom duties by the central government, prospecting and mining lease fee, royalty, dead rent, surface rent, stamp duty and registration fee, sales taxes, and environmental protection fees, and charges by state governments and tax on entry of goods, besides other general taxes. An assessment of the burden of the various levies on the prices of selected minerals and variations across states has been attempted by adopting two measures of tax impact on mineral prices, namely, the domestic tax burden and the effective rate of protection (ERP). From a review of mineral levies in India, the tax system does not appear to be designed to take into account the risk that characterizes mineral exploration and extraction. In the medium-term, the following changes are recommended - rate rationalization of the income and corporate tax structure; conver­sion of the specific royalty rate structure into ad valorem structure; combining state sales tax with royalty, abolition of the octroi and other local levies that hinder the transport of minerals; and rationalization and simplification of the various local levies.


Discrirninatory Tax Treatment of Domestic vis-a·vis Foreign Products: An Assessment

  • Completion date Jan., 2000
  • Sponsor Ministry of Commerce
  • Project leader Pawan K. Agarwal
  • Other faculty V. Selvaraju
  • Focus

    The study is focused on discriminatory tax treatment of domestic vis-a.-vis foreign products. Tax discrimination is identified in terms of effective rates of protection (ERP) and differential composite duty rates on imports and domestic products. In analysing the impact of central, state, and local taxes on competitive tax disadvantages of domestic producers vis-a-vis foreign products, the study reveals that even though most products are subject to higher net protec­tion, some products suffer competitive tax disadvantage in domestic as well as international markets because of inverted duty structure, input taxation without full set off and nil or low customs duty. A rationalisation of the tax system to ensure a level playing field between im­ports and domestic products, through immediate removal of all exemptions, end use conces­sions and input taxation along with phased reduction in high duty rates and their number, is recommended. In fact, a minimum customs duty should apply to all imports including imports of products currently not produced in the country for giving the right signal to domestic pro­ducers to venture into production of such products. The level of minimum duty can also be lowered in line with reduction in high duty rates.


Weighting Socio Economic indicators of Human Development

  • Completion date Jan., 2000
  • Sponsor
  • Project leader A.L. Nagar
  • Consultants/Other authors Sudip Ranjan Basu
  • Focus

    In this paper, human development is interpreted as an 'abstract conceptual variable' which cannot be directly measured in a straight forward manner, but is linearly determined by the interaction of a large number of causal variables (socio economic indicators). An estimator of the human development index is proposed as the weighted average of principal components of the standardised causal variables, where weights are variances of successive principal com­ponents.

    natural logarithm of real gross domestic product per capita) and data for 174 countries, as in HDR 1999 of UNDP. Later the set of socio-economic indicators, which determine the human development, is enlarged. Eleven socio-economic indica­tors are used and human development indices for 51 countries, data for which are available from Human Development Report (HDR) 1999 of UNDP, and World Development Indicators (WDI) 1999 of the World Bank, are determined.

    Ranks of countries obtained by the principal component method (the only difference be­tween the two is in standardising the causal variables), and Borda ranks are almost perfectly correlated, where as HDI and Borda ranks have smaller correlation.

    In the computation of the indicators as many principal components as the number of causal variables are used. By a little rearrangement of terms, coefficients of the causal vari­ables are compiled. These coefficients, in turn, indicate the importance of different social indicators in determining the HDI.

    In the first exercise, using the same social indicators as used for computing HDI in HDR 1999, income (loge Y) is found to be the most dominant factor in determining human develop­ment. Next, in order of importance, are LE, CGER and ALR. Further, in the exercise with eleven social indicators, income is the most dominant factor. Then, in order of importance, are available health services, environment, LE, ASW (access to safe water), CGER, etc. Thus the four variables used in the UNDP exercise maintain their order of importance as loge Y, LE, CGER and ALR. It is noted that HDI in HDR 1999 assigned higher weight (two third) to ALR and lower weight (one third) to CGER to compute the index of educational attainment. The result is at variance with the UNDP assumption.


Sikkim: A Vision Document

  • Completion date Jan., 2000
  • Sponsor Government of Sikkim
  • Project leader Ashok Lahiri
  • Other faculty Saumen Chattopadhyay
  • Consultants/Other authors Anuraclha Bhasin, A Premchand, Subir Roy
  • Focus

    This report outlines a strategy that will set the state on a path of eco-friendly, sustainable development, aimed at expanding income and employ­ment opportunities. It analyses the reasons for the slow pace of development in the past, despite substantial financial support from the central government and a low population den­sity. After spelling out goals for the economy, it elaborates the underlying fiscal policy frame­work and sectoral strategy necessary for realizing these goals. A vastly expanded role for the private sector and community is envisaged, and the introduction of technology and modern scientific methods to help the state overcome its natural handicaps of inaccessibility is emphasized.


Tradable Permits for Environmental Protection: Case Study of An Integrated Steel Plant in India

  • Completion date Jan., 2000
  • Sponsor Ministry of Environment and Forests
  • Project leader Rita Pandey
  • Consultants/Other authors Geetesh Bhrdwaj
  • Focus

    The study, a first of its kind in India aims at designing an intra-firm emission trading for an integrated steel plant. Trading scheme is designed for suspended particulate matter (SPM), a toxic air pollutant emitted by steel plants. Further, it assesses the potential savings associated with the trading scheme vis-a-vis the current regulatory approaches to control SPM. Results of the study demonstrate that emission trading is more cost effective than the existing regulatory system. They also show that intra-plant trading would yield significant savings to the industry while securing improvement in ambient air quality in the focused geographical area. Imple­mentation of emission trading would, however, require a reform of the existing regulatory framework.


Estimating Industrial pollution in India: Implications for an effluent Charge

  • Completion date Jan., 2000
  • Sponsor Ministry of Environment and Forersts
  • Project leader Rita Pandey
  • Consultants/Other authors Som Shankar Ghosh
  • Focus

    Pollution from industries constitute 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 - in terms of design of environmental regulations as well as their enforcement - 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 prioritise monitoring effort and allocate monitoring resources more efficiently by targeting industries characterised by relatively high effluent discharges and low costs of pollution abatement.


An Analysis of Tax concessions for Charitable contributions and Trusts/Institutions

  • Completion date Jan., 2000
  • Sponsor Central Board of Direct Taxes, Ministry of Finance
  • Project leader Hiranya Mukhopadhyay
  • Consultants/Other authors Arvind Modi
  • Focus

    This study was sponsored by the CBDT under a larger UNDP project entitled, "Public Sector Reforms: Redesigning Management Systems and Procedures for Enhanced Resource Mobili­sation through Direct Tax Systems". The report analyses the impact of tax incentives to chari­table trusts and for charitable contributions on effectiveness and revenues.


Management of the capital Account: India and Malaysia

  • Completion date Jan., 2000
  • Sponsor UNCTAD Geneva
  • Project leader Indira Rajaraman
  • Focus

    This study examines the overall policy framework for the management of capital account in India and Malaysia, and the relation between this regime and those for monetary and macr­oeconomic policy and the exchange rate. India and Malaysia, today in mid-2000, share a similarity of capital account regimes that would have been unthinkable, a decade ago. In both countries, there is full capital account convertibility for non-residents, but tight controls on outward flows of capital from residents. There is a lesson in this that carries validity beyond the specifics of the two countries studied. The advantages of free cross-border flows of capital and of access to a global savings pool remain unquestionably valid. However, in emerging markets with institutional weaknesses in the financial sector, it is damaging to focus on the gains of free capital flows without the institutional consolidation that would prevent recur­rence of episodes of volatility.


Taxation of Agricultural Income

  • Completion date Jan., 2000
  • Sponsor Ministry of Finance
  • Project leader Indira Rajaraman
  • Focus

    This study was commissioned by CBDT to investigate agricultural taxation as it is presently practised in India, and the possibility of transference of powers of taxing agricultural income from the state fiscal domain to the central government. The study provides outlines of a crop­-specific levy on land calibrated in physical rather than value units, levied in rem (on land regardless of ownership characteristics) rather than in personam, stratified by crop, and/or irrigation status, with provisions for catastrophe exemption. The levy carries an informationally parsimonious design which requires updated information only on area sown to taxable crops, and identification of those cultivators in each list whose yield falls above the threshold (ex­emption) yield. Even limited information of this kind can be obtained only at village level. Upward transmission to a higher-level government will carry transmission losses and intro­duce scope for corruption. The study does not, therefore, recommend levy of agricultural taxation at any higher than panchayat level. There are also recommendations for expansion of central fiscal perimeters without implications for states' rights (Article 246 of the Constitution), which can immediately be implemented.


Approach to State-Municipal Fiscal Relations: Options and Perspectives

  • Completion date Jan., 2000
  • Sponsor Second Finance Commission on States
  • Project leader Om Prakash Mathur
  • Focus

    Titled as Approach to State-Municipal Fiscal Relations: Options and Perspectives and divided into six sections, the report documents the steps that are central to addressing the state-municipal fiscal relations as envisioned in the Constitution (seventy-fourth) Amendment Act, 1992, and Article 280(3)(c) of the Constitution. An earlier draft of the report was dis­cussed in a workshop for the chairpersons and members of the second finance commission of states.


Economic Policy Instruments For Controlling Vehicular Air Pollution

  • Completion date Jan., 2000
  • Sponsor Ministry of Environment and Forests
  • Project leader Rita Pandey
  • Consultants/Other authors Geetesh Bhardwaj
  • Focus

    As trends in air pollution levels in most Indian cities reflect deterioration in air quality, there is a growing emphasis on finding and implementing methods and instruments that are more efficient in controlling air pollution than those which have already been tested and tried. The focus is on more innovative approaches, such as economic instruments based on 'pollution pays principle’ and command and control measures. This study assesses the feasibility of economic measures to prevent and control vehicular air pollution in Delhi. It estimates air pollution emissions of automobiles and suggests cost-effective measures to reduce vehicular emissions. The persistent and rigorous implementation of pollution control laws is also emphasised.


Options for Closing the Revenue Gap of Municipalities 2000-01 to 2004-05

  • Completion date Jan., 2000
  • Sponsor Eleventh Finance commission
  • Project leader Om Prakash Mathur
  • Consultants/Other authors Pratishtha Sengupta
  • Focus

    The study suggests measures for the augmentation of the Consolidated Fund of the State to supplement the resources of municipalities. After assessing the needs of municipalities, the study estimated the revenue resources that can be tapped by the municipalities under the tax provisions delegated to them. Revenue gap, or the difference between the need and availability of own resources, would indicate the requirement resources to be transferred. The study undertaken for the Eleventh Finance Commission has assessed the revenue gap of municipalities and projected their financial requirement for the time period 2000-01 to 2004-05.


External Assistance: Terms and Conditions of Transfer to States

  • Completion date Jan., 2000
  • Sponsor Ministry of Finance
  • Project leader D.K. Srivastava
  • Other faculty C. Bhujanga Rao
  • Focus

    The study examines the implications of the mechanism of transmission of external assistance to the states on terms and conditions different from the original terms and conditions. It quantifies the gains or losses between the centre and the states in the process of transmission of external assistance as Additional Central Assistance (ACA) on the terms and conditions of plan assistance. Further, it argues that instead of the present system, external assistance should be transmitted to the states on the original terms and conditions envisaged by the creditors except for one single modification. In particular, grants should be transmitted as grants and loans should be transmitted on all the original terms like grace period and maturity period, but the rate of interest should comprise two elements: the interest rate in foreign currency terms and anticipated depreciation rate. This would cover the exchange risk for the states as well as the centre. It would also expose the states to the true costs of external assistance.


Revenue Projection of Central, State and Local Taxes

  • Completion date Jan., 2000
  • Sponsor Eleventh Finance Commission
  • Project leader J.V.M. Sharma
  • Other faculty Tapas K. Sen, Diwan Chand
  • Consultants/Other authors O. P. Mathur, Sandeep Thakur
  • Focus

    The project aimed to estimate tax revenues of the three levels of government for the country as a whole, and individual states in a disaggregated manner, i.e., by individual taxes for the years 2000-01 to 2004-05. The methodology used, as required by the sponsor, is that of projection on the basis of assumed growth rates of (relevant parts of) GDP/SDP and estimated buoyancies for the period 1985-86 to 1997-98, for the projection of central and state taxes. At the state level, buoyancy-based estimates are not feasible in all cases, and a variety of estimation methods, essentially based on past growth of tax revenue are used. Owing to limited availability of data, local taxes are assumed to grow in line with the growth in SDP for different states.


Reform of Inter-State Taxation in India

  • Completion date Jan., 2000
  • Sponsor Ministry of Finance
  • Project leader Ashok Lahiri
  • Focus

    The project recommended a rational design for CST taking into consideration the issues of a com­mon market, efficiency, and inter-jurisdictional equity. The study included issues related to declared goods, consignment tax, and taxation of services.


Capacity Building for fiscal Devolution in Sri Lanka: Some Tax Issues

  • Completion date Jan., 2000
  • Sponsor UNOPS
  • Project leader Pawan K. Agarwal
  • Focus

    The study gives a brief description of the salient features of the taxes/duties, fees and other charges assigned to the three tiers of government in Sri Lanka, and identifies major issues relating to provincial taxes in the context of fiscal devolution there. Broad directions for re­form of the system of fiscal devolution and proposals that deserve consideration in the context of rationalisation of tax design in Sri Lanka are discussed. It throws some light on the desirable characteristics of the inter-governmental transfer mechanism if it is to encourage exploitation of full revenue potential by different tiers of the government. An attempt is made to estimate revenue potential of the major provincial tax as well as that of central taxes.


Gender-budgeting in India

  • Completion date Jan., 2000
  • Sponsor UNIFEM; Ministry of HRD
  • Project leader Ashok Lahiri
  • Other faculty Lekha Chakraborty
  • Consultants/Other authors P.N. Bhattacharya
  • 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; gender disaggregated benefit incidence analysis of public expenditure and to pre­scribe policy suggestions to build in a gender sensitive national budgeting process.


Database On Health Expenditure: Four Selected States

  • Completion date Jan., 1999
  • Sponsor Ford Foundation
  • Project leader
  • Focus

    This volume is a comprehensive database on the health sector with respect to the outlays of four major states of India, namely, Gujarat, Maharashtra, Orissa, and Rajasthan for the period 1985-86 to 1994-95. The significance of this ten year period is that it can be used to assess the impact of the fiscal adjustment programme (beginning 1990-91) on this redistributive expenditure by analysing government financing of the health sector during the pre-and-post structural adjustment period .


Health and Environment

  • Completion date Jan., 1999
  • Sponsor Ford Foundation
  • Project leader A.L. Nagar
  • Focus

    The objective of this study is to analyze the effects of environment on the health of a community. It is postulated that the health status of a community is a 'conceptual variable' which cannot be measured directly but is indirectly determined by the civic and socio-economic environment of the people and the physico-natural environment of the region.

    Part A of this study is focused on the health situation in the union territory/National Capital Territory (UT/NCT) of Delhi. Chapter II discusses briefly the demographic features of Delhi and Chapter III the mortality data as obtained from the annual reports on registration of births and deaths (1984 to 1994) published by the Chief Registrar (births and deaths), Government of UT/NCT of Delhi; and morbidity and mortality data for the years 1993, 1994, and 1995 from the various hospitals in Delhi under the Director General of Health Services, Delhi.


CETPs and Pollution Abatement in SSIs

  • Completion date Jan., 1999
  • Sponsor Ministry of Environment & Forests
  • Project leader Rita Pandey
  • Consultants/Other authors Saubhik Deb
  • Focus

    The small scale industries (SSIs) constitute a considerable part of total industrial pollution in India. The monitoring and enforcement of environmental laws on SSIs have, however, been highly unsatisfactory: The study focuses on ways of improving compli­ance from SSIs. The main objectives of the study are to: (i) examine the feasibility of combined treatment in controlling pollution from SSIs; and (ii) explore the feasibility of introducing incentive-based-cost-sharing arrangements. The study brings out that com­bined treatment is a cost-effecti ve option for SSIs. Thus, the subsidy for CETPs is justified. Recommended in the study are the various changes that should be effected in the existing system including the subsidy scheme for setting up CETPs, for environmental manage­ment in SSIs to become more effective. :


Fiscal Industrial Incentives of the Government of Madhya Pradesh: Costs and Benefits

  • Completion date Jan., 1999
  • Sponsor Government of Madhya Pradesh
  • Project leader Indira Rajaraman
  • Other faculty Hiranya Mukhopadhyay
  • Consultants/Other authors Namita Bhatia
  • Focus

    Madhya Pradesh, like other states, has sought to promote industrial development by offering three types of fiscal incentives: capital investment subsidies; interest subsidies; and exemption/ deferment from sales tax. These concessions have imposed heavy costs on the state exchequer; the revenues foregone from such tax concessions alone could fund at least a dozen new growth centres each year (at Rs 35 crore per growth centre). In a scenario where different types of industrial incentives are superimposed on each other, the overall impact on investment is additive. The disentangling of the incremental impact of each has been attempted in two ways, using a database on investment in large and medium industry in the state. Both econometric exercises show that tax concessions failed to play an investment promoting role. The landmark multilateral agreement reached between chief ministers of states on 16 November, 1999, to remove sales tax concessions with effect from 1 January, 2000, is thus directly in line with the findings of this study. A further date for introduction of VAT has been set at 1 April, 200"1; a full-fledged VAT operated on the tax credit method is, with very few exceptions, incompatible with giving new units a differential tax advantage: The econometric results for the capital subsidy are more ambiguous. The slowing of the growth rate of real investment after 1988 cannot be ascribed solely to the replacement that year of the central government subsidy, which was available to large and medium industrial units, by the state subsidy scheme which (with some minor exceptions) was not available to large and medium units. There was also a sharp concurrent decline in power availability. Given the overwhelming importance of infrastructure in attracting industry into a state, the first best option is the redirection of fiscal resources from capital subsidies towards infrastructure provision (the November agreement between states does not include capital subsidies in its ambit). If this first-best alternative is not acceptable, it should be possible to redefine the base to include fixed investment in infrastructure alone. Alternatively, or in addition, the capital subsidy could be confined to a set of labor-intensive thrust industries.:


Indian Property Law: Titling, Registration, and Conveyance - A Review of Legal Provisions

  • Completion date Jan., 1999
  • Sponsor Department of Administrative Reforms and Public Grievances
  • Project leader Om Prakash Mathur
  • Focus

    Undertaken at the behest of the Department of Administrative Reforms and Public Grievances, this study has looked at the four principal legislations that govern property titling and property conveyance in India: The Transfer of Property Act, 1882; The Indian Succession Act, 1925; The Registration Act, 1908; The Indian Stamp Act, 1899.

    The purpose of the review was to locate problems that citizens are faced with in securing ownership/title of a property or in conveyancing properties. The review of legislations reflected that there are serious problems in the existing legislative provisions, even as the term "property' is not adequately defined. None of the legislations defined categorically what title or ownership means, and under what conditions can a citizen secure absolute ownership. The nature of documents that are required to be presented for conveyance make legal transfers of properties (purchase/sale) extremely difficult. The study is preliminary, and lays foundation for a comprehensive examination of the property related laws in the country.


State Fiscal Studies: Kerala

  • Completion date Jan., 1999
  • Sponsor World Bank
  • Project leader D.K. Srivastava
  • Other faculty Saumen Chattopadhyay, P.R. Jena
  • Focus

    Despite exemplary success in the sphere of human development, industrial growth in Kerala has been tardy. The state economy has been rendered vulnerable to volatility of remittances from abroad. Of late, unemployment and rural poverty have been relatively high and there has been decay in the infrastructure of education, and health built up over the years. Poor returns from the 105 State Level Public Enterprises (SLPEs) have resulted in persistent revenue and fiscal deficit and mounting debt to GSDP ratio. Kerala has embarked upon an ambitious Ninth Plan (Rs.16,100 crore at 1996-97 prices) with 35-40 per cent of the plan funds being allocated to various tiers of local bodies. The participation of local bodies in the preparation of projects and plans as well as administration of plan funds is the first of its kind in Indian states. This augurs well for the economic prospects of the state. Continuance of present trends under moderate growth, as captured in the base scenario implies a deepening fiscal crisis, even while the plan has to be cut down. In this backdrop, a reform package has been suggested in the report with a view to achieving a sustainable debt to GSDP ratio and higher growth rate. Fiscal reforms include setting the stage for gradual introduction of V A T, revamping of tax administration, tapping the potential of non-tax revenues, increase in non-salary main­tenance and capital outlay and no net growth of employment in the government sector. Sector reforms include automatic revision of tariff for transport and power, privatisation of distribution of power and downsizing and gradual weeding out of non-viable SLPEs. Profit-making enterprises need to be restructured and revitalised and possibilities of merger among similar ones may be explored.


Discriminatory Tax Treatment of Domestic vis-a-vis Foreign Products: An Assessment

  • Completion date Jan., 1999
  • Sponsor Tariff Commission
  • Project leader Pawan K. Agarwal
  • Other faculty V. Selvaraju
  • Focus

    The study focused on discriminatory tax treatment of domestic vis-a-vis foreign products. Tax discrimination is identified in terms of effective rates of protection (ERP) and differential composite duty rates on imports and domestic products. Analyzing the central, state, and local taxes, the study reveals that even though most products are subject to high net protection, some products suffer competitive tax disadvantage in domestic as well as international markets because of inverted duty structure, input taxation without full set off and nil or low customs duty. A rationalization of the tax system to ensure level playing field between imports and domestic products, through immediate removal of all exemptions, end use concessions, and input taxation, along with phased reduction in high duty rates and their number is recommended. In fact, a minimum customs duty should apply to all imports including imports of products currently not produced in the country, for giving the right signal to domestic producers to venture into production of such products. The level of minimum duty can also be lowered in line with reduction in high duty rates.


A Database on Customs Tariff and Tariff Bindings for India: 1999-2000

  • Completion date Jan., 1999
  • Sponsor Ministry of Commerce
  • Project leader Pawan K. Aggarwal
  • Other faculty V. Selvaraju
  • Focus

    In the context of the ongoing external liberalisation as well as the multilateral trade negotiations under the auspices of the WTO, an urgent need to have a comprehensive database on customs tariff and tariff bindings was recognised. This would facilitate in serving objectives, such as to review customs tariff vis-a-vis our international commitments on tariff bindings, compare customs tariff with that in competing countries, compute tariff equivalent of non-tariff barriers, and estimate revenue effects of alternative revenue proposals. 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 for India for the year 1999-2000.


Central Budgetary Subsidies In India

  • Completion date Jan., 1999
  • Sponsor Department of Economic Affairs; Ministry of Finance
  • Project leader D.K. Srivastava
  • Consultants/Other authors H.K. Amar Nath
  • Focus

    This study is an update of the earlier study on Government Subsidies in India, completed in 1997, and subsequently published.

    The unduly large volume of subsidies (at more than 14 percent of GDP), and the subsidy regime in India was also critically evaluated in a Discussion Paper (DP) on "Government Subsidies in India" (May, 1997), as being non-transparent, inefficiently administered, poorly targeted, and regressive, leading to misallocation and waste of resources, while keeping government budgets in persistent imbalance. While the states accounted for the bulk of these subsidies (more than 2/3rds ), the remaining subsidies emanated from the central budget.


Report on the Workshop on Value Added Tax

  • Completion date Jan., 1999
  • Sponsor DFID, India and World Bank
  • Project leader R. Kavita Rao
  • Other faculty Pawan K. Agarwal
  • Focus

    There is an urgent need to evolve a trade tax system that promotes efficiency in production and consumption that allows the development of an Indian common market and does not impair the competitiveness of the domestic producers vis-a-vis their foreign counterparts. In this context, the Institute has been advocating replacement of the existing system of sales tax by a value added tax. A workshop on VAT was organized during July 26-28,1999, with the support of DFID India and World Bank, to provide a forum for debate on the feasible design of VAT for the states of India. It was well attended, with participation from a large segment of state officials, officials from the Ministry of Finance and the Central Board of Excise and Customs (CBEC), representatives of trade and industry, and VAT experts from India and abroad. This report presents a brief summary of the deliberations at the workshop.


Health Care Status in India

  • Completion date Jan., 1999
  • Sponsor Ford Foundation
  • Project leader
  • Focus

    Health and human development form integral components of the overall socio-economic development of a nation. Measured in terms of the two most widely used indicators of health status, namely, (i) life expectancy at birth, and (ii) infant mortality rate, the health status in India has improved considerably over time. But, achievement has been limited compared to some other developing countries. For example, during 1960 and 1993, life expectancy at birth in India increased by only 38 percent against 46 percent in China, 53 percent in Indonesia and 34 percent in all developing countries. Infant mortality rate decreased by 51 percent in India as against 71 percent in China, 76 percent in Sri Lanka, 65 percent in Thailand, 82 percent in Malaysia (the lowest in developing countries being 13 percent). Health status in India is not only below that of many developing countries taken individually, but also below that of all developing countries taken together.

    Recording an average per capita annual income of about Rs 6,200 (US $ 350), India is placed in the middle range of low-income countries. For a country with this level of income, India spends a relatively significant amount on health care, that is, 6 percent of the GDP, but the returns in terms of health improvement have been poor. Further, as compared to other countries barring a few developed nations, the total health expenditure in India is fairly high at$17,750 million in 1990. Other countries, such as China, Indonesia, Sri Lanka, and Malaysia which spend a smaller amount on health (not only in absolute terms but also in per capita terms) are found to have better health status in terms of infant mortality rates and life expectancy


Health Care Systems In India

  • Completion date Jan., 1999
  • Sponsor Ford Foundation
  • Project leader
  • Focus

    With a high percentage of population either unemployed or employed in the unorganized sectors, the health care systems in India are bound to be complex. The attempt here is to present some of the important health care systems prevailing in India. First the organizational set-up for health care is presented in brief. Then, health care financing and health care provision by sectors and by sources is described. The system as a whole is examined and areas for immediate attention identified.


Health Care Financing Practices in Selected Countries

  • Completion date Jan., 1999
  • Sponsor Ford Foundation
  • Project leader
  • Focus

    Different models of health care systems including financing organisations and delivery being practised in some developed and developing countries are presented here. An attempt is made here to review the practices in selected developed and developing countries and to draw lessons, if any, for India