What are the current trends in States’ non-tax revenue mobilisation. Analyse the reasons for its decline. Suggest measures to improve the composition and growth of non-tax revenues.
Kartavya Desk Staff
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Q5. What are the current trends in States’ non-tax revenue mobilisation. Analyse the reasons for its decline. Suggest measures to improve the composition and growth of non-tax revenues. (15 M)
Difficulty Level: Medium
Reference: TH
Why the question: Recent RBI and NIPFP data show a persistent decline in States’ non-tax revenues, raising fiscal dependency concerns ahead of 16th Finance Commission debates on fiscal federalism. Key demand of the question: Discuss trends in States’ non-tax revenue mobilisation. Analyse the structural causes of its decline. Suggest actionable measures to enhance composition and growth of non-tax revenues. Structure of the Answer: Introduction: Briefly state how non-tax revenue is vital for States’ fiscal health and autonomy, and how recent trends indicate growing dependence on Central transfers. Body: Trends in non-tax revenue mobilisation: Share in total revenue is declining, with growing reliance on Central grants and stagnant returns from services and PSUs. Reasons for decline: Inefficient PSU performance, populist tariff policies, weak asset monetisation, royalty disputes, and erosion of fiscal space under GST. Measures to improve: Strengthen PSU governance, rationalise user charges, accelerate asset monetisation, reform royalty mechanisms, and institutionalise revenue strategy. Conclusion: Highlight the need for States to build sustainable, diversified non-tax revenue streams to reinforce fiscal autonomy and cooperative federalism.
Why the question: Recent RBI and NIPFP data show a persistent decline in States’ non-tax revenues, raising fiscal dependency concerns ahead of 16th Finance Commission debates on fiscal federalism.
Key demand of the question: Discuss trends in States’ non-tax revenue mobilisation. Analyse the structural causes of its decline. Suggest actionable measures to enhance composition and growth of non-tax revenues.
Structure of the Answer:
Introduction: Briefly state how non-tax revenue is vital for States’ fiscal health and autonomy, and how recent trends indicate growing dependence on Central transfers.
• Trends in non-tax revenue mobilisation: Share in total revenue is declining, with growing reliance on Central grants and stagnant returns from services and PSUs.
• Reasons for decline: Inefficient PSU performance, populist tariff policies, weak asset monetisation, royalty disputes, and erosion of fiscal space under GST.
• Measures to improve: Strengthen PSU governance, rationalise user charges, accelerate asset monetisation, reform royalty mechanisms, and institutionalise revenue strategy.
Conclusion: Highlight the need for States to build sustainable, diversified non-tax revenue streams to reinforce fiscal autonomy and cooperative federalism.