Sample 20705
Sample 20705
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H L Bhatia
Ex-Reader
Shri Ram College of Commerce
University of Delhi
Delhi
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Public Finance
ISBN: 978-93-5271-850-4
Information contained in this book has been published by VIKAS® Publishing House Pvt Ltd and has been obtained by its Authors from sources
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any particular use. Disputes if any are subject to Delhi Jurisdiction only.
Printed in India.
Preface to the Twenty-Ninth Edition
Most modern economies, including ours, are undergoing a rapid multi-dimensional transformation.
In this boiling pot, the conventional advocacy by advanced economies for a global ‘free trade
regime’ is being tempered with elements of protectionism. In addition, these economies do not
mind using international institutions like WTO for promoting their self-interest at the cost of others.
International economic activities are being tweaked with the help of tax havens, manipulations of
the global financial system, rapid advancements in information technology, trade treaties, and so
on. The line of demarcation between ‘market-oriented’ and ‘State-regulated’ economies is fading
away. Their functioning is generating a host of fresh issues, problems and opportunities relating
to social welfare, stability, and equitable and sustainable growth. In addition, several developing
countries like India face umpteen additional problems like those of economic backwardness,
pervasive poverty, poor infrastructure, institutional weaknesses, data deficiency, regional disparities
and productive inefficiency, as also those emanating from fluctuations in FDI flows and increasing
protectionism being pursued by some advanced economies.
All this and much more is persuading modern governments to assume a greater pro-active role
in dealing with the emerging issues faced by their respective economies. The result is an expanding
functional field for a typical modern government supplemented with multi-dimensional developments
in the theory of public finance. Quite a few conventional concepts are being redefined.
India is in the forefront of this transformation. It is also experiencing changes in its fiscal
federalism. GST, subsuming several Central and State level indirect taxes, is feeding this process.
It has brought in concurrency of taxation in the case of several indirect taxes, though direct taxes
are still non-concurrent. Consequently, the role of the Finance Commission has also undergone
a significant modification and its terms of reference include several fresh issues. Starting with
2017–18 Budget, Railway budget stands merged with the main budget of the GOI. The GOI has
also abolished classification of its expenditure into plan and non-plan components. The Planning
Commission has been replaced by the Niti Ayog. The transformation process is still incomplete.
The 29th edition of Public Finance is a balanced blend of:
(a) theoretical developments,
(b) issues and problems confronted by India, and
(c) their proposed and adopted solutions.
It also aims at:
(i) coverage of UGC syllabus and syllabi of the Indian universities for Honours, Postgraduate
and Professional courses;
(ii) meeting the requirements of competitive exams conducted by various bodies;
vi Preface to the Twenty-Ninth Edition
(iii) providing an objective and analytical coverage of fiscal problems and issues faced by
India;
(iv) providing authentic references on the subject;
(v) enhancing ease of comprehension of the subject and its reasoning with chapter-wise
value-added features like ‘learning objectives’, ‘summary’, ‘key terms’, and ‘review
questions and exercises’.
The edition in hand makes use of the latest available data and information from diverse sources,
including GOI budget (inclusive of the Railway Budget) for 2018–19, State Budgets for 2016–17,
reports including that of the Fourteenth Finance Commission, as also a brief introductory note on
the constitution and terms of reference of the Fifteenth Finance Commission. Mention may also
be made of the detailed coverage of GST and its pervasive impact on our economy as also the
elaboration of some other special topics in Appendices.
The book is divided into two parts. Part I provides an analytical and comprehensive discussion
of both the basics and frontiers of the theory of public finance. Part II covers the framework,
issues and working of the Indian fiscal field backed by theoretical underpinnings and international
practices and experience.
As before, this thoroughly revised and updated edition not only meets the wide-based needs
of students, teachers, and the general public, but also serves as a reference volume for researches
and others.
I am happy to place on record my sincere thanks to Prof Ashma Bhatia of PGDAV College,
University of Delhi, for her invaluable help in thorough revision and updating of this volume.
Public Finance has completed over four decades of its life and hopefully would continue to
serve its esteemed readers in future also.
H L Bhatia
Preface to the First Edition
Public Finance is a subject which has the distinction of intimate interaction between theory and
practice. As such it acquires a meaning and usefulness only in the context of institutional framework
of the economy with reference to which it is being studied. The theoretical concepts and policy
applications in public finance feed upon and grow out of each other. No single theoretical model
can adequately fit in the framework of every economy since its institutional framework is a thing
unique to itself. It is important, therefore, that the discussion of public finance should be in the
context of a single economy. An attempt has been made to satisfy this criterion in the present book.
Care has been taken to draw illustrations mainly from the Indian economy and present analysis
of the theoretical problems in the context of Indian setting. As our society is committed to a rapid
economic growth along with economic justice, there is an undercurrent of ‘growth’ and ‘welfare’
considerations: in the treatment of the subject.
Public finance is a vast subject and in any book there is inevitably an involved question of
the choice of the problems and the relative emphasis accorded to them. In the present context the
issue has been resolved with reference to the syllabi of the Indian universities with the hope this
would make the book additionally useful to the students. It is divided into two Parts: part 1 covers
the Theory of Public Finance and part 2 covers the field of Indian Public Finance. The style of the
book is a lucid and simple one and an attempt has been made to clarify the nature of the issued
involved along with the main body of the argument.
I owe a debt to Dr A M Khusro under whose guidance I learnt the use of tools of research.
I would also like to express my gratitude to Dr C B Gupta, my teacher and principal, Shri Ram
College of Commerce, who has been a constant source of encouragement to me; and to Dr T
Mathew, Chairman, Department of Economics, North-Eastern Hill University, who was deeply
interested in seeing this book through.
H L Bhatia
Contents
PART-I
THEORY OF PUBLIC FINANCE
PART-II
INDIAN PUBLIC FINANCE
APPENDICES 571–587
I. Budgetary Deficits: Concepts and Measures 571–577
II. Gender Budgeting 578–582
III. Incremental Budgeting 583–587