By Shri Indranil Bhattacharyya,Director in the Fiscal Analysis Division of the Department of Economic and Policy Research (DEPR) and team.
Abstract of the talk: The speaker and his team made a presentation on the Reserve Bank of India (RBI)’s report entitled “State Finances: A Study of Budgets of 2016-17”, an annual publication that provided information, analysis and an assessment of the finances of state governments. It is the primary source for disaggregated state-wise fiscal data and delineates the changing dynamics of fiscal federalism over the years. The theme of this year’s report was the Goods and Services Tax (GST). Highlights of the report were: • Introduction of GST would have economy-wide ramifications in terms of growth, inflation, government finances and external competitiveness over the medium-term. • It is likely to champion a new course for cooperative federalism in India, focusing on collaboration between the Centre and states. • GST remains the best bet for state governments in returning to the path of fiscal consolidation without compression of productive expenditure. • GST implementation challenges should be addressed through a robust dispute resolution mechanism; with the goods and services tax network (GSTN) expected to provide the necessary information technology (IT) infrastructure to all stakeholders. • Greater devolution of resources through statutory transfers would provide states with the flexibility to prioritize their expenditure in sync with their development objectives. • From a medium term perspective, debt sustainability of states is likely to be the key factor in shaping the evolving contours of state finances.