Fiscal constraints

The state of government finances is extremely vital in a developing country like India. If government finances are stretched, as is often the case, the state will be neither in a position to provide basic public goods nor able to make enough investment in capacity-enhancing infrastructure. Higher levels of deficit and debt can not only crowd out private investment but also create potential risks to financial stability. It is thus important that the state collect enough revenue to discharge its functions. While these broad issues are well known, governments, both at the Union and state levels, have not been able