HISTORICAL EVOLUTION OF FEDERAL FINANCES IN INDIA

The paper confirms that the provisions of fiscal federalism laid out in the IndianConstitution are connected to the legacy of the British rule in India. Applying historicalanalysis the author divides the period from the starting of British imperial administration inIndia to the enactment of Indian Constitution into five different phases on the basis of theevolution of Centre-Province financial relations. The principles of fiscal federalism in Indiagradually evolved from highly centralized fiscal governance during the initial period of theBritish rule until being manifested in the Constitution. Various parliamentary enactments,executive directions, committees and commissions as well as individual interventioncontributed to this transformation. The paper further lays out the unique features of theIndian Constitution such as mutually exclusive tax domains and various mechanismsaddressing fiscal imbalances due to the Government of India Act of 1935 enacted by theBritish Parliament. It concludes that while British authorities designed the system of fiscaladministration in India after their preferences, the makers of the Indian Constitution preferredto retain the same provisions with minor variations in the Constitution of independent India.