Distribution of Taxes and Grants between the Center, State and Local Governments in India: A study of India’s Fiscal Federalism

Abstract

The Constitution of India through various provisions upholds the quasi-federal structure of government in terms of separation of power in enacting legislations and in the process of executing the law in the territory. Whereas the concept of fiscal federalism is also having a significant relevance in upholding the structure of government in India. In general terms, the distribution of financial obligations among Union and State Government is termed as fiscal federalism, but the actuality of the same is not that simple. The Constitution of India allows the Union government to distribute grants and taxes among State and local governments from the Consolidated Fund of India and Contingency Fund of India as and when required. But not all grants are backed by statutory provisions, rather some of them are left at the discretion of the Union government and Finance Commission. Which shows the central state
financial relationship can be affected by the conflicts between ruling and opposition parties and as a result the citizens of the country will be affected severely. This research work has been designed to analyze the obstacles that the Indian government faces to stabilize the fiscal federalism due to various factors and at the same time to justify the federal status of the country in terms of distribution of financial obligations.