Finance Commission Transfers in India

Federal fiscal transfers to state governments are necessary for reducing vertical and horizontal fiscal imbalances. In India also there exists vertical and horizontal fiscal imbalances and federal transfers have become a regular feature of the Indian federation. These are channeled through the Finance Commission, the Planning Commission and various Ministries of the Central government in the form of Shared Tax Revenue, Grants and Loans. The Finance Commission transfers have emerged as one of the major sources of transfers. The present volume makes a modest attempt to analyse various issues relating to the transfer of fiscal resources in the form of shared tax revenue, loans and grants and their relative importance have been discussed. An analysis regarding the structure of fiscal federalism in India, and a detailed empirical analysis to examine the growth and relative importance of different types of fiscal transfers have been made. A critical analysis of the criteria for inter se distribution of Finance commission transfers and their horizontal equity has been discussed.