| Summary/Abstract |
This article focuses on whether the discontinuity in the structure of the Indian economy, which started with the economic reforms of 1991, triggered changes in federal fiscal arrangements. This examination is embedded in a larger overview of the basic fiscal structure, characterized by annual flows from the national government (the “Center”) to subnational states that have both statutory (guaranteed and formulaic) and non-statutory (discretionary) components. An unforeseen consequence of trade liberalization was the loss of trade tax revenue, which drove down tax collections at the Center both as a percent of GDP, and relative to states. Four major policy changes initiated after 1991 are attributable to post-reform concerns with efficiency in the fiscal structure. The final shift of indirect taxation to a fully value added configuration, with comprehensive coverage of goods and services, is scheduled for introduction by September 16, 2017.
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