Analyze the current issues in fiscal federalism in India, with an emphasis on state’s taxation powers and financial autonomy.
Kartavya Desk Staff
Topic: Issues and challenges pertaining to Federal structure.
Topic: Issues and challenges pertaining to Federal structure.
Q3. Analyze the current issues in fiscal federalism in India, with an emphasis on state’s taxation powers and financial autonomy. (10M)
- •*Difficulty level: Moderate
- •Reference: Live Law , Insights on India *
Why the question: While upholding the power of States to tax mineral rights and mineral-bearing lands, the Supreme Court (8:1 majority) emphasised the importance of safeguarding the principle of fiscal federalism. Key Demand of the question: Analyze the issues in fiscal federalism in India, focusing on the taxation powers and financial autonomy of states. Directive: Analyze – Break down the topic into its component parts and examine each part critically. Structure of the answer: Introduction: Define fiscal federalism. Briefly mention its significance and role of Finance commission in fiscal federalism. Body: First Part: Current Issues in Fiscal Federalism Centralization of Taxation Powers Revenue Sharing Disputes: Dependency on Central Grants Borrowing Limitations Uneven Development Second Part: Impact on State’s Taxation Powers and Financial Autonomy Reduced Fiscal Space Conditional Grants Erosion of Financial Independence Third part: Suggest measures Conclusion: Emphasize the need for reforms to enhance the financial autonomy and taxation powers of states to ensure balanced fiscal federalism.
Why the question:
While upholding the power of States to tax mineral rights and mineral-bearing lands, the Supreme Court (8:1 majority) emphasised the importance of safeguarding the principle of fiscal federalism.
Key Demand of the question:
Analyze the issues in fiscal federalism in India, focusing on the taxation powers and financial autonomy of states.
Directive:
Analyze – Break down the topic into its component parts and examine each part critically.
Structure of the answer:
Introduction:
Define fiscal federalism. Briefly mention its significance and role of Finance commission in fiscal federalism.
First Part: Current Issues in Fiscal Federalism
Centralization of Taxation Powers
Revenue Sharing Disputes:
Dependency on Central Grants
Borrowing Limitations
Uneven Development
Second Part: Impact on State’s Taxation Powers and Financial Autonomy
Reduced Fiscal Space
Conditional Grants
Erosion of Financial Independence
Third part: Suggest measures
Conclusion:
Emphasize the need for reforms to enhance the financial autonomy and taxation powers of states to ensure balanced fiscal federalism.