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OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Fiscal Prospects and Reforms in India

Substantial fiscal consolidation was achieved under the aegis of the 2003 Fiscal Responsibility and Budget Management Act. While deficits widened anew in 2008 and 2009, against the backdrop of the global financial and economic crisis, efforts to reduce them have resumed since. To ensure continued progress, as well as stronger government finances in the longer term, the medium-term fiscal framework needs to be improved, notably by embedding the annual budget in a detailed three-year rolling programme. Expenditure needs to be controlled better, in particular as regards subsidies, which the central government has indeed been trying to rein in, though with difficulty in the face of rising world oil prices. Expenditure also needs to become more effective, in particular in the areas of health care, education and social assistance. On the revenue side, tax reforms have been tabled, both for direct taxes and for the complex and inefficient system of indirect taxes. Corporate income tax rates are being cut, though the headline rate remains high. Lower taxation for large special economic zones deserves to be maintained for some time. For the personal income tax, which only a fairly small proportion of the population pays, thresholds are set to be raised considerably. A goods and services tax is to be introduced, which should help reduce the segmentation of the national market for goods and services. Customs duties have been reduced on average but remain high for some categories of imports, implying scope for further reduction over time.

This Working Paper relates to the 2011 OECD Economic Survey of India (www.oecd.org/eco/surveys/india)

English

Keywords: transfers, poverty, subsidies, saving, fiscal institution, debt, tariffs, India, government budgets, fiscal policy, expenditure, taxation
JEL: H74: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Borrowing; H70: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Government; Intergovernmental Relations: General; E69: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: Other; H51: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Health; O53: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Economywide Country Studies: Asia including Middle East; E66: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / General Outlook and Conditions; H2: Public Economics / Taxation, Subsidies, and Revenue; H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions; H71: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Taxation, Subsidies, and Revenue; E60: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General; H83: Public Economics / Miscellaneous Issues / Public Administration; Public Sector Accounting and Audits; H72: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Budget and Expenditures; E61: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Policy Objectives; Policy Designs and Consistency; Policy Coordination; I38: Health, Education, and Welfare / Welfare, Well-Being, and Poverty / Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs; H53: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Welfare Programs; O23: Economic Development, Innovation, Technological Change, and Growth / Development Planning and Policy / Fiscal and Monetary Policy in Development; H50: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Related Policies: General; E65: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Studies of Particular Policy Episodes; I32: Health, Education, and Welfare / Welfare, Well-Being, and Poverty / Measurement and Analysis of Poverty; H6: Public Economics / National Budget, Deficit, and Debt; I18: Health, Education, and Welfare / Health / Health: Government Policy; Regulation; Public Health; H81: Public Economics / Miscellaneous Issues / Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts; E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy; H54: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock
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