NO : WP-2026-012
AUTHOR : Ashima Goyal
TITLE : Strengthening fiscal legislation through extrinsic and intrinsic incentives
ABSTRACT :
Sovereigns can always find ways to escape or to dilute rules, so incentives and commitment are essential complements to fiscal responsibility acts. Government expenditure is required for growth in India, especially education, health, creating human and physical capital, but the combined fiscal deficit is already among the highest in the world. High borrowing costs imply a large share of revenues is committed for debt service. Borrowing only for investment, including in human capital, is the way to sustain growth while reducing debt ratios. The paper examines the experience of national and sub-national Indian governments and explores ways to improve intrinsic as well as extrinsic incentives for productive expenditure within the structure of Indian fiscal federalism.
Keywords: Fiscal responsibility, intrinsic and extrinsic incentives, debt and deficit ratios, fiscal federalism
JEL Code: H61, H63, H70
Weblink: http://www.igidr.ac.in/pdf/publication/WP-2026-012.pdf
