Fiscal federalism: Why public finance matters to every citizen
Sarthak Pradhan and Pranay Kotasthane's book, Fiscal Fables, offers insights into India's public finance, linking tax policies to citizen welfare.
Public finance is a crucial aspect of government functioning, yet it often remains a complex and confusing topic for the average Indian citizen. In their new book, Fiscal Fables: A Citizen's Guide to Public Finance, researchers Sarthak Pradhan and Pranay Kotasthane aim to simplify this subject through relatable stories and examples. The authors spoke about their book on the Grand Tamasha podcast, discussing why understanding public finance matters for every citizen.
Pradhan explained that citizens must comprehend public finance because they cannot "exit a government's fiscal choices." While politicians may desire more spending, fiscal decisions have consequences for citizens and future generations. Kotasthane compared the Indian tax system to Michael Scott from The Office, stating that the government often tries to achieve multiple goals with a single instrument, leading to complications.
Income tax returns, for instance, are notoriously complicated because the government aims to promote exports, incentivize savings, drive infrastructure investment, ensure balanced regional development, and boost employment.
The Goods and Services Tax (GST) has been criticized for its implementation, but it is seen as an improvement over the previous system. The GST merged 11 indirect taxes, reducing the cascading effect of taxation through the input tax credit mechanism. Pradhan also noted the GST Council as an institutional innovation, as it brings together the Union and state governments under one roof, a unique arrangement in India.
However, Pradhan and Kotasthane acknowledged that the system still has absurdities, but it is not worse than before.
Regarding fiscal federalism, Kotasthane argued that the media often portrays debates over resource distribution as a fight between states like Tamil Nadu and Uttar Pradesh, or Maharashtra and Bihar. However, the real challenge lies in vertical devolution, which involves determining how much money the Union government should retain and how much state governments should receive.
Written by urgent.news from Hindustan Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
