Topic: Union and States Financial relations in India. Has post-1991 liberalisation in any way affected it? : Comment Based Question!

The constitutional provisions controls the financial relations between the centre and the states. Sources of income of the income of the Union Government are mentioned in Union list and some of these sources are of income tax other than agriculture income, customs and excise duty. Sources of income of state government the sources of income of state government find mention in state list.

These sources are land revenue, taxes on vehicles, sales tax etc. On the other hand there are certain taxes which are levied by the union but are collected and appropriated by the states. These taxes are stamp duties and duties of excise on medicinal and toilet preparation.

These are not the final and substantive provisions in themselves as Article 280 requires to constitute a Finance Commission for the distribution of revenue between the union and the states, and after 73rd and 74th Amendment, there is a provision for the constitution of the Consolidated Fund of the state from which resources are to be provided to the village, Panchayats and Municipalities.

Further, according to Article 360, during the proclamation of financial emergency, the President can give financial directives to the states. The Union government supplements the financial resources of the states by two other means besides distribution of tax revenues. These are:
(i) Advancement of central loans.
(ii) Grants-in-aid given to the states.

Post-1991 liberalisation, the union government has acquired more importance in developing industries and economic growth. With the development of means of communication the role of union govt. has increased for the balanced and rapid economic development.

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