Articles by C Rangarajan

This paper examines the working of Australia's fiscal transfer system in the context of its long-term evolution, paying particular attention to salient changes that have occurred since the introduction of a comprehensive Goods and Services Tax (GST). The GST has served to increase the vertical imbalance in the system, which was high even prior to this change, by placing more revenue resources with the Commonwealth Government in Australia. In spite of a high degree of expenditure centralisation, considerable emphasis is placed in Australia on achieving horizontal fiscal equalisation through an elaborate mechanism of equalisation transfers, which looks into both revenue and expenditure sides of the state budgets and calculates revenue and expenditure 'disabilities' that account for departures from a pure equal per capita distribution of the shareable amounts. This paper looks at the equity and efficiency implications of the Australian equalisation transfers and considers its relevance for the Indian system, which has many comparable features. Apart from the need for making equalising features of the Indian transfer system more transparent, there is need for emphasising some cost disabilities, particularly those that are structural and exogenous in nature.

The Canadian system of fiscal transfers, developed over a long period of time, has two central features: equalisation grants, which are constitutionally guaranteed and the Canadian Health and Social Service Transfers (CHST). This paper examines the relevance and applicability of the Canadian system of inter-governmental transfers in the Indian case. Equalisation grants are meant to ensure that provinces have sufficient revenues to provide reasonably comparable levels of services at reasonably comparable levels of taxation. An elaborate 'representative tax system' approach using individual revenue bases is used in Canada for determining the equalisation grants, although there has recently been a debate to use a more macro approach. The source-by-source approach is less practical in the Indian case for want of comparable and reliable information required for applying the method. A more practical alternative is the macro approach, which is adopted in India, but better indicators of fiscal capacity than those based on GSDP need to be used. In addition, the concept of ensuring that resources are available for maintaining the per capita expenditure of select basic services at certain levels among states, as attempted in Canada through the CHST transfers, is worth exploring.

The loss of credibility of official statistics, especially in the 1990s, prompted the appointment of the National Statistical Commission with wide-ranging terms of reference. After analysing the deficiencies of the Indian statistical system in terms of its administrative and technical requirements, the commission has made several recommendations to revamp the statistical system. This article presents the approach taken by the commission and some of the salient recommendations.

In the aftermath of the east Asian crisis, the need to reassess and understand the role of capital flows has become imperative. In this context two sets of questions arise. The first set centres on whether some forms of capit al flows are preferable to others. This issue has to be addressed from the angles of volatility and impact on capital formation and growth. The second set of questions relates to the extent and forms of controls that can be imposed on capital flows. Opening up of capital account need not preclude the imposition of moderate controls, either price based or regulatory, on capital flows. Controls should be selective, designed to achieve the specific objective of containing speculative flows. The Asian crisis is not an argument against capital account liberalisation. Capital account liberalisation is not a discrete event. It is a process and should be done in stages.

While recognising that state and market have separate but interconnected roles to play, the emerging view is that the market must be allowed to work wherever it can function efficiently and the state must step in wherever the market does not succeed. In this paper an attempt is made to provide the broad contours of this debate, derive lessons from international experience and provide a framework for determining the appropriate mix.