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, 2001; 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.

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.

This study is an exhaustive scrutiny of the present system that includes rate structure, valuation, evasion of duty, administrative structure, collection of tax, administrative organisation, interface with other departments and legal considerations. Experience of other states and inter-state comparisons are used where required. The report recommends substantial reduction in rates of stamp duty for efficiency reasons as well as to contain tax evasion, and a series of administrative measures to modernise an essentially unchanged system of several decades in line with changed circumstances. It also recommends substantial changes in the relevant Act to control widespread evasion through under-valuation and avoidance of tax through legal loopholes.

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.

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-effective 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.

The central aim of the State Fiscal Study: Tamil Nadu is "to establish the capacity of the state of Tamil Nadu to absorb development aid effectively - that is, to determine its capacity to generate necessary counterpart funds in the short-term and, in the longer-­term, its capacity to generate funds to maintain the assets and programmes financed by development aid". The growth performance of Tamil Nadu has been impressive despite the modest natural resource base and it i;:; among the most industrialized states in India. Although its finances are well-managed there is still room for selective fiscal correction. During the period under study, there was a significant rise in revenue expenditure at the expense of capital expenditure. In financing the expenditure, the revenue-raising effort has so far been concentrated only on tax revenue and attempts to augment non-tax revenues through cost recoveries has been a neglected area and therefore need clear revamping. Fiscal balance for most part of the study period was negative as also on the decline because of fast growth of revenue expenditure while signs of improvement in recent years have not proved to be long lasting. If the same fiscal trends continue, fiscal deficit is likely to assume disquieting levels due to increasing component of revenue deficit. In addition, capital expenditure is likely to shrink further, government debt is likely to be used more for consumption purposes rather than for investment, and maintenance expenditure will be on the decline. A simulated fiscal scenario with a set of suggested reforms, if implemented, can reverse these trends and turn the fiscal balances into surpluses.

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. A sample survey of 291 households from slum clusters and non-slum areas of various localities in Delhi was undertaken. Chapter IV provides the socio-economic profile of the population of Delhi, sample design and the questionnaire, and Chapter V provides the socio¬economic profile of sample households. Finally, Chapter VI provides the cluster-wise and age-¬wise distribution of diseases in slum and non-slum areas of the NT/NCT of Delhi in accordance with the sample survey.

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.

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.

The water sector comprising irrigation, rural water supply, and urban water supply is a major component of expenditure in India. In 1994-95, it accounted for approximately 25-­28 percent of the total capital expenditure of the states and between 1.5-8.7 percent of their revenue expenditures. What have been the trends in public expenditure on water? What are the recoveries on water account? Is the uncovered portion of expenditure rising or declining? What is the contribution of the water sector to the fiscal deficit of the states? Addressing these questions and based on the finance accounts of states, the study has highlighted that the uncovered portion of expenditure has risen in most states, which is not in the interest of the sound finance of states. The study has advocated the need to formulate appropriate pricing policies for the water sector.

This report proposes, and provides the design for, a crop-specific presumptive supplement to the land revenue, which like the land revenue will be land-based and levied per acre. The supplementary levy is to be related, on the basis of income norms obtained from field surveys, to observed crop yields, which will serve as the presumptive indicator. The case for a crop-specific levy is predicated on the assumption that returns to cultivation are not equalised by cropping pattern shifts, even within a homogenous agro-climatic region, because of supply-side entry barriers in terms of soil and irrigation requirements, and further constraints imposed by the need for bilateral tie-ups between the cultivator and buyer in sunrise sectors like seed propagation. The design for the levy proposed includes exemption for crop failure, whether idiosyncratic or non-idiosyncratic, in the form of a threshold yield below which the tax does not apply. The only information required for each assessment year is a listing of cultivators growing any of the crops in the subset selected for taxation and an identification of those in each list whose yields did not fall below the stipulated exemption threshold. Such information will be easily and costlessly obtainable locally, which is why levies of this type are feasible only at panchayat level. The list of crops for consideration will first be identified by panchayats in accordance with the local ordering in terms of profitability, and forwarded to a state-level agency, which will define the taxable subset based on surveyed data. It is recommended that the revenues so raised should be jurisdictionally retained for improvement of agricultural and other infrastructure. This will facilitate compliance, give panchayats a stake in enforcement, and enable downward accountability in place of the upward accountability ensured by present systems of audit and control of government expenditure.

The model law is aimed at providing the States with a statutory framework for introducing a system of VAT. It would help states in having harmony in the structure and procedures of the proposed VAT in the country. It is observed that in the absence of any model before the states, varied systems causing diversity in the structures and procedures have cropped up.

The subject did not attract the attention of policymakers or academicia because the major part of the municipal infrastructure in the past was financed out of grants extended to municipalities by the state governments. The state governments did not encourage debt financing of infrastructure even for those municipal bodies which were statutorily permitted to borrow for specified purposes. Recent years have, however, witnessed significant changes in the country in the mode of municipal infrastructure financing. It is in this context that the NIPFP undertook with support from NIUA under the US AID-supported programme, a pilot study of municipal debt financing in 12 municipal corporations with a view to gain an initial understanding of issues concerning the subject of municipal debt. The study was designed to probe into issues, such as, the extent to which debt as an instrument is used for financing the infrastructure; the use to which debts have been generally put; and the impact of such debts on the revenue budget of municipalities.

This report was part of a larger research project conducted at the NIPFP. In suggesting measures to revamp customs administration, the report dealt with the broad categories of import-export licensing policy, structure of tariffs and some general aspects. The report is based on field visits to various collectorates of customs and central excise, meetings and discussions with officers at various levels and representatives of chambers of business and industry.

The main objective of the study are: (i) to estimate the volume and composition of housing subsidy flowing from the Central government, identify weaknesses, and suggest changes to 'make the subsidy system more transparent and equitable; and (ii) an in-depth study of housing subsidies in the two States, Andhra Pradesh and Tamil Nadu and examine what changes in policies and programmes should be brought about for the subsidy programmes to be more effective and efficient.

The objective of the study was to enquire whether the Central fiscal incentives provided to the small scale industry are rational and well defined, and till what point the support is rational and justified. The study involved exploring the existing data sources as well as ascertaining the impact of the central fiscal incentives through a sample survey of registered 551 units. The major findings of the study are that SSIs may require selected incentives to survive and grow as they are not only at a disadvantage vis-a-vis other industries but also show reasonably good performance in terms of productivity indicators. It is emphasized that in the short run some tax incentives need to continue, but over the long run non tax incentives like infrastructural development and initial finance should be the focus. Emphasis should be on developing strong horizontal and vertical linkages.

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This report recommends the use of presumption as one way by which to increase the universe of taxpayers, and thus achieve sustainable fiscal correction in India. Presumption may be theoretically second-best to the ideal direct tax, based on self-declared income actuals with personalized deductions. But this ideal is not possible to achieve or even approach in developing countries like India, where a large volume of business is transacted in cash, and is not routed through the banking system. Faced with a consequent insufficiency of information records of the kind required for verification of self-declaration, enforcement of compliance becomes next to impossible especially in certain sectors and occupations. It is here that the need arises for base-broadening supplements to conventional direct taxation. The report examines the reasons for the failure of presumptive experiments in India, and points out that the Rs. 1400 alternative flat levy is not in fact an example of a presumptive levy since absolutely no presumption of any kind is involved. The report also recommends the use of asset­ based presumption for the corporate sector, as a way by which to combat the phenomenon of zero-tax companies.

The report examines the system of motor vehicle taxation in Delhi with the objective of analyzing the aspects of economic efficiency, equity, administrative feasibility and inter-state comparability of introducing passenger and goods tax in Delhi. The study also examines the issue of the levy of such a tax on vehicles registered outside the State, by using Delhi roads, and makes an estimate of additional revenue generation from the tax at suggested rates. It also reviews the issue of road congestion and vehicular pollution in this context. The study concludes on the basis of the theoretical principle of user charges, likely incidence pattern and a comparison of taxes on motor vehicles in Delhi and four northern States of Uttar Pradesh, Punjab, Haryana and Rajasthan as well as in the other metropolitan cities of Bombay, Madras and Calcutta that there is scope for such a tax in Delhi, although for administrative reasons it may be best to levy it as a fixed amount per annum in the form of an additional motor vehicle tax.

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This study using data relating to 1989-90, develops a methodology for estimating effective rates of commodity taxes with only partial credit for taxes paid on inputs. Effective tax rates have been estimated for all major commodity taxes in India, namely, customs duties, Union excise duties and sales tax. These effective tax rates have been used for computing incidence of these taxes on consumers in rural as well as urban areas.

This study has proposed amendments to the Indian Stamp Act and States Stamp Act, in the light of the new economic policy. An important perspective of the proposed amendments is that the amended Acts should not hamper economic growth and the structure of duties should be so designed as to minimize the regressive effects.

This study has made an in depth study of 274 municipal bodies in India. The underlying purpose of this study was to place before the State Finance commissions (set up in pursuance of the Constitution Seventy-fourth Amendment, 1992), a paper that would inform them about: (i) the kind of data base that existed at the level of municipal base; (ii) what use could be made of such a data base; and (iii) what kinds of problems and issues confronted the municipal bodies.

HUDCO and HUDCO’s Borrowers make extensive use of subsidies and have access to direct and other forms of low-cost credit to promote housing and several other activities for the economically weaker and low income groups of households. This study examines the implications of withdrawal or reduction in subsidies. Special circuits and directed credit and suggests options as to what might be done to equip HUDCO and HUDCO’s borrowers to deal with this challenge. The package of recommendations relates to resource mobilization strategy (e.g. making larger use of lines of credit mechanism, credit-related bonds. and securitization of mortgages), restructuring of the lending profile and commitment of the entire institutional framework to programmes for the poor rather than the commitment of only HUDCO, and deregulation of HUDCO.

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The study analyses the deteriorating financial situation in the State in detail to identify the problem areas. It makes several recommendations to improve revenue productivity of the tax system by rationalizing the structure and operation of sales and excise taxes in the State. The analysis of non-tax revenues and subsidies (defined as unrecovered cost of social and economic services) highlights the need for rationalization of user charges and revamping of public enterprises. The study makes recommendations to improve the working of public enterprises, particularly the State Electricity Board and the State Road Transport Corporation.

It examines the trends in Central and State government expenditures since 1974-75 in terms of both budgetary categories and economic and functional classification. The study attempts to explain the trends as an outcome of the operation of various interest group politics. It highlights the phenomenal increase in current expenditure during the eighties. The study also brings out how the increasing divergence in expenditure levels among the States had tended to rise and tries to identify the underlying factors.

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This study was taken up at the request of the Government of Punjab. After making an overview of the State finances in Punjab, its critical areas are identified to improve the fiscal performance of the State. An attempt is made to identify items of unproductive Government expenditures. Recommendations are made to compress unproductive expenditures. The study also analyses in detail the working of public enterprises in the State and suggests appropriate measures to phase out the losses of these undertakings and improve the buoyancy of non-tax revenues in order to restore fiscal balance in the State.

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This study analyses the trends in non-tax revenue of local bodies and examines the scope for further improvement in non-tax revenue of local bodies in West Bengal. User charges, rents and fee are identified as underused potential revenue sources. The study suggests ways and means of augmenting non-tax revenue in West Bengal.

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An analysis of enforcement practices in India considering the information system on potential assesses, assessment procedures and follow-up in terms of appeals, penalties and prosecution are studied in this report on the basis of a field survey of five income tax ranges as well as secondary data sources. Suggestions are made on all these aspects for the improvement of enforcement.

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This report was based on an extensive examination of international data pertaining to China, Malaysia, Thailand and Brazil among others. The report highlighted differences in the approach in India and in the countries mentioned in linking concessions to foreign investments with various social objectives. The report suggests directions for re-orienting concessions for foreign investment.

The study examines the major export incentives in India and their cost to the public exchequer. By analyzing the possibilities of rationalization in the context of the rapidly changing exchange rate, it offers two suggestions for reducing the burden on the exchequer arising through export promotion schemes. First, at the prevailing exchange rate, incentives of the export sector could be limited to about 30 per cent of the export earnings. Second, the existing incentive rates could be made more uniform by scaling down the significant differences found in the present rates, among various commodity groups.

This study was undertaken to examine the practices in the States levying entry tax - that is whether they confirm to sound principles of taxation - to evolve principles for reforming the entry tax structure and also to suggest norms for utilization of tax proceeds.