The Indian Fiscal Commission began its work in November 1921, and submitted its report the following year. Its chairman was Ibrahim Rahimtoolah, while John Maynard Keynes was vice- president. Keynes could not come over to India to make any meaningful contribution.
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There were seven Indians and five Englishmen in the commission. Rahimtoolah, in the company of others such as Gopal Krishna Gokhale and Madan Mohan Malaviya, had fought a hard battle over the previous decade to get the colonial government to support Indian industrialization as well as fiscal autonomy.
There were two major reasons why the British gave in to their demands. First, they were trying to neutralize the growing opposition to their rule by accepting the nationalist argument that industrialization led by the state was needed for India to break out of the colonial division of labour. Second, there was a dollop of self-interest as well, as the recent world war had shown how the most important colony in the British Empire did not have the strategic depth to deal with economic disruptions.
The report of the Indian Fiscal Commission is still worth reading. It called for the protection of select industries based on three criteria. First, India should have natural advantages in the industry that was to be protected. Second, that industry would not develop rapidly enough or even not at all without such protection. Third, it should eventually be ready to face global competition once protection was removed.
There were some other principles as well. Protection should not impose a heavy burden on domestic consumers through higher prices. Raw materials and capital goods should be imported free of any protective duties. Semi-manufactured goods used in Indian industry—or intermediate goods in modern parlance—should be taxed as lightly as possible. There should be no tax on exports. Most importantly, a permanent Tariff Board should be set up to advise the legislature on the claims of various industries for protection.
The Commission looked at the issue of import tariffs from two angles—protecting infant industries and diversifying the Indian industrial structure. However, despite its overall support for protection, the Commission also took a detailed look at related issues such as its impact on productivity, wages, inflation, monopoly profits, government revenues, foreign capital and imperial preferences (like free trade agreements within the British Empire). Protection was to be temporary, since it would impose economic costs over the long term.
Five of the seven Indian members added a long dissent note to the main report, arguing that its arguments for protection are too tentative. The overall recommendations were very much in tune with the mainstream nationalist view that countries such as India which were late in the industrialization process would need some government intervention to provide an initial push. The examples of countries such as Germany, Russia and Japan were studied by Indian nationalists.
The Indian mainstream had few free traders at that time. One of the rare exceptions was the historian Jadunath Sarkar. In History Men: Jadunath Sarkar, G. S. Sardesai and Raghubir Sinh, a fine book on three brilliant historians, T.C.A. Raghavan writes how Sarkar held a contrarian position. “Protection would be a premium on inefficiency and would foster a fatal indolence,” wrote Sarkar in his 1911 book on the economics of British India.
The Indian Fiscal Commission was one of the three milestones in Indian industrial policy at that time. In 1918, the Indian Industrial Commission had a report on how to accelerate industrialization. In 1927, the Royal Commission on Indian Currency and Finance submitted its recommendations on the rupee’s exchange rate as well as the need to set up a central bank in India.
The circumstances that led to the formation of the Indian Fiscal Commission are no longer relevant today. However, the report is still valuable, not just as a source of Indian economic history, but also of how to think about the advantages and disadvantages of protection, identify industries to be supported, assess broader economic consequences, and consider differential treatment for raw materials, capital goods, intermediate goods and consumer goods. The structure of global production is also very different now, with trade in intermediate goods dominating trade in consumer goods, thanks to an intricate web of global supply chains.
These are lessons worth remembering at a time when the Indian government has increased import tariffs on nearly 3,500 items since 2014 in a clear push towards protectionism.
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In a diverse country like India, where each State is socially, culturally, economically, and politically distinct, measuring Governance becomes increasingly tricky. The Public Affairs Index (PAI 2021) is a scientifically rigorous, data-based framework that measures the quality of governance at the Sub-national level and ranks the States and Union Territories (UTs) of India on a Composite Index (CI).
States are classified into two categories – Large and Small – using population as the criteria.
In PAI 2021, PAC defined three significant pillars that embody Governance – Growth, Equity, and Sustainability. Each of the three Pillars is circumscribed by five governance praxis Themes.
The themes include – Voice and Accountability, Government Effectiveness, Rule of Law, Regulatory Quality and Control of Corruption.
At the bottom of the pyramid, 43 component indicators are mapped to 14 Sustainable Development Goals (SDGs) that are relevant to the States and UTs.
This forms the foundation of the conceptual framework of PAI 2021. The choice of the 43 indicators that go into the calculation of the CI were dictated by the objective of uncovering the complexity and multidimensional character of development governance
The Equity Principle
The Equity Pillar of the PAI 2021 Index analyses the inclusiveness impact at the Sub-national level in the country; inclusiveness in terms of the welfare of a society that depends primarily on establishing that all people feel that they have a say in the governance and are not excluded from the mainstream policy framework.
This requires all individuals and communities, but particularly the most vulnerable, to have an opportunity to improve or maintain their wellbeing. This chapter of PAI 2021 reflects the performance of States and UTs during the pandemic and questions the governance infrastructure in the country, analysing the effectiveness of schemes and the general livelihood of the people in terms of Equity.
Growth and its Discontents
Growth in its multidimensional form encompasses the essence of access to and the availability and optimal utilisation of resources. By resources, PAI 2021 refer to human resources, infrastructure and the budgetary allocations. Capacity building of an economy cannot take place if all the key players of growth do not drive development. The multiplier effects of better health care, improved educational outcomes, increased capital accumulation and lower unemployment levels contribute magnificently in the growth and development of the States.
The Pursuit Of Sustainability
The Sustainability Pillar analyses the access to and usage of resources that has an impact on environment, economy and humankind. The Pillar subsumes two themes and uses seven indicators to measure the effectiveness of government efforts with regards to Sustainability.
The Curious Case Of The Delta
The Delta Analysis presents the results on the State performance on year-on-year improvement. The rankings are measured as the Delta value over the last five to 10 years of data available for 12 Key Development Indicators (KDI). In PAI 2021, 12 indicators across the three Pillars of Equity (five indicators), Growth (five indicators) and Sustainability (two indicators). These KDIs are the outcome indicators crucial to assess Human Development. The Performance in the Delta Analysis is then compared to the Overall PAI 2021 Index.
Key Findings:-
In the Scheme of Things
The Scheme Analysis adds an additional dimension to ranking of the States on their governance. It attempts to complement the Governance Model by trying to understand the developmental activities undertaken by State Governments in the form of schemes. It also tries to understand whether better performance of States in schemes reflect in better governance.
The Centrally Sponsored schemes that were analysed are National Health Mission (NHM), Umbrella Integrated Child Development Services scheme (ICDS), Mahatma Gandh National Rural Employment Guarantee Scheme (MGNREGS), Samagra Shiksha Abhiyan (SmSA) and MidDay Meal Scheme (MDMS).
National Health Mission (NHM)
INTEGRATED CHILD DEVELOPMENT SERVICES (ICDS)
MID- DAY MEAL SCHEME (MDMS)
SAMAGRA SHIKSHA ABHIYAN (SMSA)
MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE SCHEME (MGNREGS)