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6) How is fiscal federalism different from cooperative federalism? What are the challenges to Indian fiscal federalism. Discuss(250 words)

Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

6) How is fiscal federalism different from cooperative federalism? What are the challenges to Indian fiscal federalism. Discuss(250 words)

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Why this question:

The article provides for an assessment of Fiscal federalism in India , its link with cooperative federalism and the challenges being faced by Fiscal federalism in India.

Key demand of the question:

The answer must discuss how the state of cooperative federalism in India is analyzed by focusing on the trends in vertical fiscal imbalances between the Centre and the states, the impact of Fiscal Responsibility and Budget Management acts on the fiscal space of the states, the implications of the Terms of Reference of the Fifteenth Finance Commission, and the need for empowering local governments in the context of Centre–state relations.

Structure of the answer:

Introduction:

Begin with what you understand by Fiscal federalism.

Body:

Discuss the following :

  • How fiscal federalism is linked to cooperative federalism.
  • Discuss trends in central and state taxes, the issues in sharing taxes and distribution of grants, the vertical fiscal imbalances, the impact of FRBM legislations, Fifteenth Finance Commission and empowering local governments (LGs), in the context of Centre–state relations.
  • Discuss the specific challenges.

Conclusion:

Conclude with what needs to be done to overcome the challenges.