{"id":35218,"date":"2026-06-11T15:08:36","date_gmt":"2026-06-11T09:38:36","guid":{"rendered":"https:\/\/triumphias.com\/blog\/?p=35218"},"modified":"2026-06-11T15:23:23","modified_gmt":"2026-06-11T09:53:23","slug":"impact-of-the-new-economic-measures-on-fiscal-ties-between-the-union-and-states-in-india-2","status":"publish","type":"post","link":"https:\/\/triumphias.com\/blog\/impact-of-the-new-economic-measures-on-fiscal-ties-between-the-union-and-states-in-india-2\/","title":{"rendered":"Impact of the new economic measures on fiscal ties between the union and states in India \u2013 Triumph IAS &#038; Vikash Ranjan Sir"},"content":{"rendered":"<h3 style=\"text-align: center;\"><span style=\"font-family: georgia, palatino, serif;\"><strong>\ud835\udc11\ud835\udc1e\ud835\udc25\ud835\udc1e\ud835\udc2f\ud835\udc1a\ud835\udc27\ud835\udc2d \ud835\udc1f\ud835\udc28<span style=\"font-family: georgia, palatino, serif;\">\ud835\udc2b: Essay for IAS\u00a0<\/span><\/strong><\/span><\/h3>\n<table style=\"border-collapse: collapse; width: 100.123%;\">\n<tbody>\n<tr>\n<td style=\"width: 100%; text-align: justify;\">\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_68 ez-toc-wrap-center counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >What's Inside this Blog!<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/triumphias.com\/blog\/impact-of-the-new-economic-measures-on-fiscal-ties-between-the-union-and-states-in-india-2\/#INTRODUCTION\" title=\"INTRODUCTION\">INTRODUCTION<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/triumphias.com\/blog\/impact-of-the-new-economic-measures-on-fiscal-ties-between-the-union-and-states-in-india-2\/#MAIN_BODY\" title=\"MAIN BODY:\">MAIN BODY:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/triumphias.com\/blog\/impact-of-the-new-economic-measures-on-fiscal-ties-between-the-union-and-states-in-india-2\/#Best_Essay_Writing_Course_for_UPSC_CSE\" title=\"Best Essay Writing Course for UPSC CSE\">Best Essay Writing Course for UPSC CSE<\/a><\/li><\/ul><\/nav><\/div>\n<h2 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"INTRODUCTION\"><\/span><span style=\"font-family: georgia, palatino, serif;\"><strong>INTRODUCTION<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>Fiscal federalism lies at the heart of India\u2019s constitutional design, balancing national unity with regional diversity through an equitable distribution of financial resources and responsibilities.<\/strong> The Union and the States are not merely administrative units but partners in development, whose fiscal relations determine the effectiveness of governance, social welfare, and economic growth. Since the early 1990s, and more intensively in recent years, India has witnessed the introduction of new economic measures aimed at liberalisation, macroeconomic stability, efficiency, and global competitiveness. These measures have profoundly influenced the fiscal ties between the Union and the States.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>The impact of these changes has been complex and often contested.<\/strong> While new economic measures have enhanced revenue mobilisation and policy coordination in certain areas, they have also accentuated concerns about fiscal autonomy, vertical and horizontal imbalances, and the changing nature of cooperative federalism. An examination of this impact thus requires an integrated analysis of economic reforms, institutional mechanisms, and constitutional principles.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"MAIN_BODY\"><\/span><span style=\"font-family: georgia, palatino, serif;\"><strong>MAIN BODY:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>To begin with, fiscal federalism refers to the allocation of taxation powers, expenditure responsibilities, and intergovernmental transfers among different levels of government.<\/strong> In India, this framework is constitutionally mandated through the Seventh Schedule, Finance Commissions, and provisions related to grants-in-aid. The underlying philosophy is that while the Union possesses broader and more elastic revenue sources, States bear significant expenditure responsibilities, particularly in social sectors.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\">This structural arrangement inevitably creates vertical and horizontal fiscal imbalances, which are addressed through devolution and transfers. <strong>Thus,<\/strong> fiscal ties are not static but evolve with economic policies, political priorities, and developmental needs.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>The economic reforms initiated in 1991 marked a turning point in India\u2019s fiscal relations.<\/strong> Liberalisation reduced trade taxes, rationalised excise duties, and shifted the tax base towards indirect and later direct taxes. While these reforms improved efficiency and integration with global markets, they also altered revenue flows between the Union and States.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>Initially,<\/strong> States faced revenue uncertainty due to the reduction in taxes such as customs and excise, which formed a significant part of their shared revenues. Consequently, the role of Finance Commissions became more critical in ensuring compensation and stability. Over time, States increasingly depended on central transfers, thereby deepening fiscal interdependence.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>Perhaps the most significant new economic measure affecting fiscal ties has been the introduction of the Goods and Services Tax (GST).<\/strong> By subsuming multiple indirect taxes into a unified tax regime, GST aimed to create a common national market and improve tax compliance. Institutionally, the GST Council represents a novel experiment in cooperative federalism, where the Union and States jointly decide tax rates and policies.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>However,<\/strong> GST has also reconfigured fiscal autonomy. States surrendered significant taxation powers in return for assured compensation and a share in GST revenues. Delays in compensation payments and constraints on States\u2019 independent revenue-raising capacity have led to tensions, particularly during economic downturns. Thus, while GST has strengthened coordination, it has also intensified debates over fiscal sovereignty.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>New economic measures have also emphasised fiscal discipline through frameworks such as the Fiscal Responsibility and Budget Management (FRBM) Act.<\/strong> While fiscal prudence is essential for macroeconomic stability, uniform fiscal targets can constrain States\u2019 developmental spending, especially in times of crisis.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>Moreover,<\/strong> conditional borrowing limits and centrally imposed fiscal norms have increased the Union\u2019s oversight over State finances. This trend, while intended to prevent fiscal profligacy, raises concerns about asymmetry in fiscal power and the erosion of States\u2019 discretionary space.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>Another dimension of changing fiscal ties is the expansion and restructuring of centrally sponsored schemes (CSS).<\/strong> New economic measures often align these schemes with national priorities such as infrastructure, health, and social security. While CSS facilitate targeted interventions and uniform standards, they also impose conditionalities that limit States\u2019 flexibility in expenditure allocation.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>As a result, States often function as implementing agencies rather than autonomous policy actors.<\/strong> This shift reflects a broader centralising tendency in fiscal relations, even as the rhetoric of cooperative federalism persists.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>At a philosophical level, fiscal federalism embodies the principle of shared responsibility and distributive justice.<\/strong> The changing fiscal ties raise normative questions about fairness, autonomy, and democratic accountability. Excessive centralisation may undermine the principle of subsidiarity, whereby decisions are best made at the level closest to the people.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>Conversely,<\/strong> unchecked fiscal autonomy without accountability can threaten macroeconomic stability. Therefore, the challenge lies in reconciling efficiency with equity, and unity with diversity. The legitimacy of new economic measures depends not only on economic outcomes but also on their alignment with constitutional values.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>To ensure that new economic measures strengthen rather than strain fiscal ties, certain reforms are essential.<\/strong> First, institutional mechanisms such as the GST Council and Inter-State Council must function transparently and consensually. Second, predictable and timely transfers are crucial to maintain trust.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>Third,<\/strong> fiscal rules should incorporate flexibility to accommodate diverse developmental needs and economic shocks. Finally, States must be empowered to innovate in revenue mobilisation and expenditure management, reinforcing their role as equal partners in development.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>CONCLUSION:<\/strong><\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>In conclusion, new economic measures have profoundly reshaped fiscal ties between the Union and the States in India.<\/strong> While they have enhanced efficiency, coordination, and macroeconomic stability, they have also intensified centralisation and raised concerns about fiscal autonomy. The impact is thus neither uniformly positive nor entirely adverse; it reflects a dynamic and evolving federal compact.<\/span><\/p>\n<p><span style=\"font-family: georgia, palatino, serif;\"><strong>Ultimately, the strength of India\u2019s fiscal federalism lies in its ability to adapt to changing economic realities without compromising constitutional principles.<\/strong> New economic measures must therefore be guided by a spirit of cooperative federalism, where fiscal ties are characterised by trust, transparency, and shared commitment to inclusive development. Only then can economic reform and federal harmony reinforce each other in the Indian polity.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3><span style=\"font-family: georgia, palatino, serif;\">Read more blog:<\/span><\/h3>\n<blockquote class=\"wp-embedded-content\" data-secret=\"pDk2nOBk6l\"><p><a href=\"https:\/\/triumphias.com\/blog\/migration-urban-growth-and-social-stress\/\">Migration, Urban Growth, and Social Stress<\/a><\/p><\/blockquote>\n<p><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; visibility: hidden;\" title=\"&#8220;Migration, Urban Growth, and Social Stress&#8221; &#8212; TriumphIAS\" src=\"https:\/\/triumphias.com\/blog\/migration-urban-growth-and-social-stress\/embed\/#?secret=PsdDq8JYzc#?secret=pDk2nOBk6l\" data-secret=\"pDk2nOBk6l\" width=\"600\" height=\"338\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe><\/p>\n<blockquote class=\"wp-embedded-content\" data-secret=\"3U1HZePhnT\"><p><a href=\"https:\/\/triumphias.com\/blog\/social-media-is-inherently-a-selfish-medium-2\/\">Social media is inherently a selfish medium \u2013 Triumph IAS &#038; Vikash Ranjan Sir<\/a><\/p><\/blockquote>\n<p><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; visibility: hidden;\" title=\"&#8220;Social media is inherently a selfish medium \u2013 Triumph IAS &#038; Vikash Ranjan Sir&#8221; &#8212; TriumphIAS\" src=\"https:\/\/triumphias.com\/blog\/social-media-is-inherently-a-selfish-medium-2\/embed\/#?secret=s2QgatKmE1#?secret=3U1HZePhnT\" data-secret=\"3U1HZePhnT\" width=\"600\" height=\"338\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe><\/p>\n<p>&nbsp;<\/p>\n<h1 style=\"text-align: center;\"><span class=\"ez-toc-section\" id=\"Best_Essay_Writing_Course_for_UPSC_CSE\"><\/span><span style=\"font-family: 'book antiqua', palatino, serif;\"><strong>Best Essay Writing Course for UPSC CSE<br \/>\n<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p style=\"text-align: justify;\"><span style=\"font-family: 'book antiqua', palatino, serif;\">If you\u2019re preparing for the <strong>UPSC Civil Services Examination (CSE)<\/strong>, one paper that can unlock exceptional scores and a top rank is the <strong>Essay Paper<\/strong>. While <strong>General Studies<\/strong> and <strong>Optional Subjects<\/strong> are structured and syllabus-driven, the <strong>Essay writing<\/strong> segment is where individuality, critical thinking, and articulation truly shine.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-family: 'book antiqua', palatino, serif;\">Among various Essay programs available across India, <a href=\"https:\/\/triumphias.in\/\" target=\"_blank\" rel=\"noopener\"><strong>Triumph IAS<\/strong><\/a>, under the expert mentorship of <strong>Vikash Ranjan Sir<\/strong>, offers the <a href=\"https:\/\/triumphias.com\/course-details-essay-fighters-test.php\" target=\"_blank\" rel=\"noopener\"><strong>Best Essay writing Course for UPSC CSE<\/strong><\/a>. 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Test Series (CSE Mains 2026\u201327)\" width=\"1131\" height=\"1600\" srcset=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2026\/05\/WhatsApp-Image-2026-05-23-at-12.42.57.jpeg 1131w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2026\/05\/WhatsApp-Image-2026-05-23-at-12.42.57-212x300.jpeg 212w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2026\/05\/WhatsApp-Image-2026-05-23-at-12.42.57-724x1024.jpeg 724w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2026\/05\/WhatsApp-Image-2026-05-23-at-12.42.57-106x150.jpeg 106w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2026\/05\/WhatsApp-Image-2026-05-23-at-12.42.57-768x1086.jpeg 768w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2026\/05\/WhatsApp-Image-2026-05-23-at-12.42.57-1086x1536.jpeg 1086w\" sizes=\"auto, (max-width: 1131px) 100vw, 1131px\" \/><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\ud835\udc11\ud835\udc1e\ud835\udc25\ud835\udc1e\ud835\udc2f\ud835\udc1a\ud835\udc27\ud835\udc2d \ud835\udc1f\ud835\udc28\ud835\udc2b: Essay for IAS\u00a0 INTRODUCTION Fiscal federalism lies at the heart of India\u2019s constitutional design, balancing national unity with<\/p>\n","protected":false},"author":1,"featured_media":35221,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[110,1047,1046],"tags":[16466,16464,16471,16459,11904,12403,16467,16456,16463,16461,16462,16458,16472,16468,16460,16469,16457,16470,16465],"class_list":["post-35218","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-essay","category-essay-ias","category-essay-upsc","tag-centrally-sponsored-schemes","tag-centre-state-financial-relations","tag-cooperative-and-competitive-federalism","tag-economic-reforms-and-federalism","tag-economic-reforms-in-india","tag-finance-commission-india","tag-fiscal-autonomy-of-states","tag-fiscal-federalism-in-india","tag-frbm-act-and-states","tag-gst-and-state-autonomy","tag-gst-council-cooperative-federalism","tag-impact-of-new-economic-measures","tag-impact-of-the-new-economic-measures-on-fiscal-ties-between-the-union-and-states-in-india","tag-indian-federalism-upsc","tag-lpg-reforms-1991","tag-polity-and-governance-upsc","tag-union-and-state-fiscal-relations","tag-upsc-mains-gs-paper-2","tag-vertical-and-horizontal-fiscal-imbalance"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/35218","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/comments?post=35218"}],"version-history":[{"count":5,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/35218\/revisions"}],"predecessor-version":[{"id":35226,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/35218\/revisions\/35226"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/media\/35221"}],"wp:attachment":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/media?parent=35218"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/categories?post=35218"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/tags?post=35218"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}