Fiscal Policy News

Saturday’s Supreme Court judgement in Tamil Nadu’s case has come as a win for federalism in the context of legislative autonomy. Over-centralization of power doesn’t serve the Indian economy’s interests either.

Today’s trade war mustn’t distract India from pursuing a clear domestic agenda for economic success. Here’s a thought experiment of an autarkic model that’ll help clarify what we should do.

Like other southern states, Tamil Nadu deserves a fair share of Indian resources. The 16th Finance Commission has an opportunity to rebalance Centre-state relations for the sake of India’s future.

India’s economy will have to expand at a pace that would need sustainably large budget allocations for capital expenditure. After all, government capex has proven to be a key driver of economic growth.

Trends over the past two decades reveal both progress and persistent inequalities. With covid largely behind us, our policy focus should now be on inclusive growth, financial security and leveraging a digital transformation.

The idea was always controversial from an economic perspective, but now it’s being deployed—in the US and Argentina, for example—as a political weapon in the shape of a redistributive tool.

After 2025-26, India plans to switch its target. Going by the level of public debt will afford the government greater flexibility—even if this measure is harder to track and our monetary policy framework may need to adapt.

India’s 8th Pay Commission is being set up to revise the salaries of an already privileged class of employees. Unless kept modest, pay hikes are sure to hit the government’s finances hard. The country can’t afford any extravagance.

The target of Viksit Bharat requires it to balance immediate challenges with long-term development goals. Maintain fiscal prudence while pushing for sustainable growth and job generation, with reforms and policies implemented swiftly and effectively.

Improvements have been made, but they’re patchy. Indian states should spend more of their scarce resources on capital projects that can support future economic growth than on freebies and subsidies.