Generating Fiscal Space: A Suggested Framework
Fragile macroeconomic environment, constrained tax policy autonomy, and higher funding, needs to meet the rising needs and expectations of citizens for public amenities. This challenge also confronts the policy makers in India at Union, State, and Urban and local government levels. This has lent greater urgency to generating fiscal space while sustaining high broad-based growth and fairness of the fiscal system. This seminar presents and explains a possible framework for generating fiscal space. It can be adapted for a specific context by a city, a state, a region, or a country to enhance fiscal sustainability and to address present and future fiscal risks. It is intended to facilitate a systemic and integrated approach for addressing fiscal challenges.
Such a framework is relevant for India due to the evolving dynamics of Union- State fiscal relations which portends availability of larger unconditional resource transfers and responsibilities for the provision of public amenities from the Union government towards the States.
This seminar first reviews the concept of fiscal space advanced in the literature, and then presents an integrated framework for generating fiscal space in the Indian context. The framework focuses on growth (essential for generating fiscal space); ways to increase conventional and non-conventional sources of revenue, including more productive use of government’s assets and regulatory privileges; and better expenditure management, including procurement reforms.
The framework thus involves both income flows and balances sheets, and reasons from citizen-centric outcomes desired to fiscal space needed. This will be elaborated, with India specific examples. The paper suggests setting up of a Fiscal Risk Management Office (FRMO) at the union government, and at the State level.
Mukul Asher is a Professorial Fellow at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He specialises in public sector economics and social security issues in Asia. His recent research focusses on social policy, ageing, pensions and social security policy. He has published extensively in international journals, and has authored and edited several books. His most recent being a 2015 book titled ‘Strengthening Social Protection in East Asia’ co-edited with Fukunari Kimura, and published by Routledge. He has been a consultant to the World Bank, the International Monetary Fund, the World Health Organization, the Asian Development Bank and the Organization for Economic Cooperation and Development, among other institutions. He has been a resource person for policy makers in several Asian countries such as India, Indonesia, Kazakhstan, Vietnam, People’s Republic of China, and Sri Lanka. He is on the Editorial Board of International Social Security Review, a leading journal in the field. He teaches applied public sector economics and India’s economic development and policy.
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