My colleague, Meenaz Munshi and I wrote an opinion piece on the negative welfare effects of government over-reliance on a few revenue handles. We often see that public discourse evaluating the fiscal health of the government focuses solely on the implications of growing expenditures while completely ignoring the other half of the equation – the government’s revenue sources. We give global as well as Indian examples to make a case for governments to relay on a diversified revenue portfolio as it does not only promote fiscal health but also prevents perpetuation of welfare distortions that affect all citizens.
Excerpt from the op-ed: “Usually, governments around the world have a wide array of revenue generating options at their disposal. However, the nature of the economy and administrative capacity may constrain, either by choice or compulsion, the government’s revenue generating capacity. These constraints result in governments heavily relying on a few handles, often indirect in nature, which could create economic distortions and have serious welfare consequences.”
Read the full piece here.