This paper provides a self-contained overview of the present problems of state finances in India. It begins with an overview of historical evolution and current institutional structures, including economic, political, administrative and fiscal aspects of India’s federal system. The paper then reviews the current situation of India’s state government finances, going on to consider various develo...

We construct a general equilibrium trade model of a two-class small open host or source country. Government consumption tax or tariff revenue finances either the provision of an imported public consumption good or income transfers. Within this framework, among other things, under plausible assumptions, we show the following: When consumption tax revenue finances the provision of a public good, ...