Would like to add few points why cooperative federalism is not being followed in taxation
- States have little rights left to raise money by taxation with GST kicking in
- dependency on GST revenue devolved from center which takes time
- the minimum tax revenue guarantee that center made to states for 5 years after GST was accpeted by states - the center has fallen back on that promise
- states raising funds is also challenge because :-
- Center's approval needed to raise borrowing limit
- center needs to stand as guarantor, thus dependence on center
- high rate of interest for loans by states because no clear revenue projection of states (union has incoe tax, coporrate tax etc )
- Thus dependent on Center to borrow from market and handover to states.
- Some critiques argue that "cooperation" in "federalism" works when same party is in state and center. But a single monolithic taxation structure like GST is not viable in a economicallly and politically divergent set up - where states have popular mandate, and have little money to meet those promises.
The division of taxes in india is mainly done by two constitutional bodies- FC and GST council. Though both try to ensure fiscal federalism, but only GST council is able to represent states in its composition.
Features which undermine the "cooperative and "federalism" are -
1. The FC composition
2. FC recommendations cannot be challenged by the aggrieved state.
3. Article 293
4. In the pre GST era- states could raise additional funds by means like - increasing the sales tax etc. but currently not allowed and thus center dependency.
5. Under GST regime - center supposed to be releasing the funds to state periodically, but this is being delayed.
6. Taxes levied under the GST laws to be shared as per prescribed by the Article 270(2)- subject matter of FC.
7. Parameters for the division of the taxes between states - decided by FC - states views undermined. E..g. the southern states plight over change of base year for population
However, GST council in certain ways, tries to ensure the Cooperative federalism -
1. By ensuring states participation by vote in the decision making.
2. To make recommendations on inter state trade - coming under the GST council ambit.
3. If centre refuses to make allocations as per the recommendations of GST council - the states can approach the supreme court.
Way forward -
1. GST council can develop a pro active, independent body to ensure timely release of funds from centre to states.
2. A robust dispute redressal mechanism can be set up by GST council.
3. More efficient vertical as well as horizontal devolution of funds can be ensured.
4. States to be allowed to raise funds from international source under special circumstances.
5. States efforts like maintenance of forests, population control measures etc. to be incentivised and their historical aspects to be taken care of while allocating funds.
The current COVID 19 situation requires a decentralised approach. The center is such extraordinary times must take steps to ensure that states can raise the funds locally and thus the states wont have to rely on non-essential commodities like liquor to tackle a health crisis.
These are very good points. What is your source?
#2 Write a critical note on challenges to Self-reliance in the context of India's economy.In an attempt to work on the famous saying of Winston Churchill "never let a good crisis go to waste", India has embarked upon a bold program of Self-reliance in the midst of Covid-19. The program is named 'Atma Nirbhar Bharat Abhiyaan'.
Components of Self-reliance -
Economy, Infrastructure, Systems, Demography, Demand
Challenges in achieving Self-reliance -
1. Economic challenges - land acquisition, complex and rigid labor laws, low investment in R&D, lack of innovation and push towards entrepreneurship
2. Infra challenges - lack of forward and backward linkages for the industry, investment, technology
3. Systemic challenges - tax structure, financial system, supply chains, technology access and use, governance-related red-tapism and complex law structure, financial literacy
4. Demographic challenges - low employability, lack of skills, quickly rushing through the golden period of demographic dividend
5. Demand related challenges - As per Household Consumer Expenditure in India Survey conducted by NSO -consumer spending has declined for the first time in four decades in 2017-18
A clear path to work on aspects related to land, labor, liquidity, and laws will prove to be a big boost to attract investment and serve as a strong foundation of our Make In India program. Promoting local will help revive the demand that will eventually help achieve a Self-reliant India.
I think someone is deleting my comments. Anyway, this is a little off the mark. There are inherent challenges to Self Reliance. 4 Areas Primarily - Energy Security, Defence Procurement, Forex Reserves, and a few more.
Just suggestions. It was covered in Hindu Article 2 days back.
Point 3 was allegorical. But yes, an examiner burdened with 100 copies isn't going to read 20 points. An answer needs to be made presentable.
Every candidate has similar points. What differentiates a Dabi from a Tabi is the way the answer is written. Esp in such questions wherein you've multiple stakeholders, impact areas.
It's just a suggestion. I may be wrong.
+1
Tabi and dabi, how did you make that up?
#2 Write a critical note on challenges to Self-reliance in the context of India's economy.In an attempt to work on the famous saying of Winston Churchill "never let a good crisis go to waste", India has embarked upon a bold program of Self-reliance in the midst of Covid-19. The program is named 'Atma Nirbhar Bharat Abhiyaan'.
Components of Self-reliance -
Economy, Infrastructure, Systems, Demography, Demand
Challenges in achieving Self-reliance -
1. Economic challenges - land acquisition, complex and rigid labor laws, low investment in R&D, lack of innovation and push towards entrepreneurship
2. Infra challenges - lack of forward and backward linkages for the industry, investment, technology
3. Systemic challenges - tax structure, financial system, supply chains, technology access and use, governance-related red-tapism and complex law structure, financial literacy
4. Demographic challenges - low employability, lack of skills, quickly rushing through the golden period of demographic dividend
5. Demand related challenges - As per Household Consumer Expenditure in India Survey conducted by NSO -consumer spending has declined for the first time in four decades in 2017-18
A clear path to work on aspects related to land, labor, liquidity, and laws will prove to be a big boost to attract investment and serve as a strong foundation of our Make In India program. Promoting local will help revive the demand that will eventually help achieve a Self-reliant India.
I think someone is deleting my comments. Anyway, this is a little off the mark. There are inherent challenges to Self Reliance. 4 Areas Primarily - Energy Security, Defence Procurement, Forex Reserves, and a few more.
Just suggestions. It was covered in Hindu Article 2 days back.
Hey, thanks for the feedback@goldberry. I did not stick to the challenges specifically related to the economy of the country. I'll work on it and also check out the article.
Hey, Just adding inputs as per Dipin Sir, there is a lot of editorial content on this topic and most of them have argued about structural issues on self reliance. I am not talking only economy here. Defense , Oil, and practicaly everything that we import is a challenge to our self reliance.
@rashiv Agreed.
@Mayashura Please provide a reference article also for anwering questions.!
