30/08/2022 - Economy

KEY POINTS

·        As both the Union government and States are expected to work closely in a co-operative federal structure, frictions arising out of these exchanges might have repercussions on both resource sharing and expenditure prioritisation.

·        A set of issues related to Goods and Services Tax (GST) such as the rate structure, inclusion and exclusion of commodities, revenue sharing from GST and associated compensation.

·        Second, State-level expenditure patterns especially related to the welfare schemes of States.

·        A key issue of recent debates between the States and the Centre is the quantity and quality of public expenditure by the States.

·        While States demand more fiscal space for increasing discretionary spending, the Centre is pushing for more fiscal discipline by reducing the scope for discretionary spending and limiting States to focus on mandatory expenditures.

·        In a federal system, States’ fiscal stress gets spilled over to the Centre, leading to a situation of overall magnified fiscal slippages.

·        Fiscal expansion financed through debt and the resultant debt accumulation have important impacts on the economy both in the short run as well as in the long run.

·        The Centre, too, on its part needs to demonstrate commitment to fiscal discipline by sticking to announced fiscal glide path to ensure the sustainability of a frictionless co-operative federal structure.

Kindly review 

Kindly review

Kindly review