Reforming India’s Fiscal Transfer System : Resolving Vertical and Horizontal Imbalances

Two central problems in a fiscal transfer systemrelate to resolving vertical and horizontal imbalances. In the context of the setting of the 13th Finance Commission, this paper looks at the methodological background of fiscal transfers followed by recent Finance Commissions in India, particularly the Twelfth Finance Commission (TFC). It is noted that in India, there is long - term stability in the share of states after transfers in the combined revenues of the centre and the states. It is argued that this stability depends on linking the share of states in the transfers, particularly tax devolution with the difference in the buoyancies of central and states taxes. In the context of horizontal imbalance, it is argued that some of the recent Finance Commissions have implicitly followed an axiomatic approach to tax devolution and brought in some normative elements in determining grants. In spite of large difference in fiscal capacities, a high degree of equalization has been achieved. It is shown, for example, that in the case of TFC recommended transfers, nearly 88 percent of needed equalization was achieved while devoting 50 percent of transfers to resolving vertical imbalance. Amethodology is also developed to determine weights of vertical and equalizing components of transfers through devolution. In the case of the Twelfth Finance Commission, the horizontal component of tax devolution is strengthened by a scheme of equalizing health and education grants.fiscal transfer system, vertical imbalance, horizontal imbalance, Twelfth Finance Commission

Equalizing Health and Education : Approach of the Twelfth Finance Commission

Service standards in the provision of health and education in the states in India are low on average and also characterized by large inter-state disparities. These disparities are due to differences in fiscal capacity, differences in revenue effort and differences in priority accorded to the concerned sectors. The transfers from the central to state governments in many federations are guided by the equalization principle. Two important examples are Canada and Australia. When unconditional transfers are made, equalization transfers aim to neutralize deficiency in fiscal capacity but not that in revenue effort. Sometimes adjustments affecting cost and need factors may also be accommodated. Both in Canada and Australia, apart from general purpose and unconditional transfers, there are also specific purpose transfers. Considering the fact that it is important not only to improve the average levels of provisions of health and education services, but also to reduce disparities across states, the Twelfth Finance Commission has recommended special grants for health and education to selected states. In determining these grants, the TFC had kept the equalization principle in perspective and has not underwritten deficiency in expenditure if it arises because states accord less than average priority to the concerned sector. Recommended grants however only partially meet the requirement of resources for these sectors. For meeting the needs fully, much larger amounts would be involved. TFCs initiative should be taken only as a beginning that requires supplementation by plan grants. After gaining experience in implementing these grants, larger grants and a more comprehensive approach can be developed.Twelfth Finance Commission, health, education, equalization principle, India

Reforming Indirect Taxes in India : Role of Environmental Taxes

Extensive reforms of Indias indirect taxes at the central and the state levels has prepared the necessary ground for the implementation of a comprehensive goods and services tax (GST). The Empowered Committee of the State Finance Ministers in their First Discussion Paper and the Thirteenth Finance Commission in their recently submitted report have suggested GST models which are quite different in many respects. This paper identifies these differences and argues that within the regime of taxation of goods and services in India environmental tax reform should also be incorporated to make the tax regime play a significant role in managing environment. The environment tax reforms will yield both a fiscal double dividend and an economic double dividend making the Indian economy pursue a path of sustainable development.Taxes, Environment

Three-dimensional numerical simulation of magnetohydrodynamic-gravity waves and vortices in the solar atmosphere

With the adaptation of the FLASH code we simulate magnetohydrodynamic-gravity waves and vortices as well as their response in the magnetized three-dimensional (3D) solar atmosphere at different heights to understand the localized energy transport processes. In the solar atmosphere strongly structured by gravitational and magnetic forces, we launch a localized velocity pulse (in horizontal and vertical components) within a bottom layer of 3D solar atmosphere modelled by initial VAL-IIIC conditions, which triggers waves and vortices. The rotation direction of vortices depends on the orientation of an initial perturbation. The vertical driver generates magnetoacoustic-gravity waves which result in oscillations of the transition region, and it leads to the eddies with their symmetry axis oriented vertically. The horizontal pulse excites all magnetohydrodynamic-gravity waves and horizontally oriented eddies. These waves propagate upwards, penetrate the transition region, and enter the solar corona. In the high-beta plasma regions the magnetic field lines move with the plasma and the temporal evolution show that they swirl with eddies. We estimate the energy fluxes carried out by the waves in the magnetized solar atmosphere and conclude that such wave dynamics and vortices may be significant in transporting the energy to sufficiently balance the energy losses in the localized corona. Moreover, the structure of the transition region highly affects such energy transports, and causes the channelling of the propagating waves into the inner corona.Comment: 11 Pages, 12 Figures, Accepted for the publication in MNRA

Dynamics of supertubes

We find the evolution of arbitrary excitations on 2-charge supertubes, by mapping the supertube to a string carrying traveling waves. We argue that when the coupling is increased from zero the energy of excitation leaks off to infinity, and when the coupling is increased still further a new set of long lived excitations emerge. We relate the excitations at small and large couplings to excitations in two different phases in the dual CFT. We conjecture a way to distinguish bound states from unbound states among 3-charge BPS geometries; this would identify black hole microstates among the complete set of BPS geometries.Comment: 50 pages, 3 figure