Assess the impact of the growing reliance on cesses on Centre–State fiscal balance. Explain its long-term consequences for cooperative federalism in India.
Kartavya Desk Staff
Topic: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure.
Topic: Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure.
Q3. Assess the impact of the growing reliance on cesses on Centre–State fiscal balance. Explain its long-term consequences for cooperative federalism in India. (10 M)
Difficulty Level: Medium
Reference: NIE
Why the question The growing dependence on cesses has emerged as a critical issue in India’s fiscal architecture, raising constitutional, economic and federal concerns about revenue sharing, state autonomy and the future of cooperative federalism. Key Demand of the question The question requires explaining how the increasing use of cesses affects the fiscal balance between the Union and the States and examining the long-term implications of this trend for cooperative federalism in India. Structure of the Answer Introduction Briefly locate cesses within India’s constitutional framework of fiscal federalism and highlight their rising significance in Centre–State financial relations. Body Explain how cesses, by remaining outside the divisible pool, alter the vertical fiscal balance and constrain States’ fiscal space. How sustained reliance on such instruments can weaken predictability, trust and partnership, thereby reshaping the nature of cooperative federalism. Conclusion Conclude by emphasising the need to realign fiscal practices with constitutional principles of shared responsibility and cooperative federalism.
Why the question The growing dependence on cesses has emerged as a critical issue in India’s fiscal architecture, raising constitutional, economic and federal concerns about revenue sharing, state autonomy and the future of cooperative federalism.
Key Demand of the question The question requires explaining how the increasing use of cesses affects the fiscal balance between the Union and the States and examining the long-term implications of this trend for cooperative federalism in India.
Structure of the Answer
Introduction Briefly locate cesses within India’s constitutional framework of fiscal federalism and highlight their rising significance in Centre–State financial relations.
• Explain how cesses, by remaining outside the divisible pool, alter the vertical fiscal balance and constrain States’ fiscal space.
• How sustained reliance on such instruments can weaken predictability, trust and partnership, thereby reshaping the nature of cooperative federalism.
Conclusion Conclude by emphasising the need to realign fiscal practices with constitutional principles of shared responsibility and cooperative federalism.