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Asia and Pacific > India

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Cover IMF Working Papers
Growth Convergence and Public Finances of India and its States
Rajan Govil
and
Khyati Chauhan
Lack of convergence in per capita income across Indian states requires greater resources for lower-income states for investment and improved public services. Central and state governments need to raise revenue (both tax and non-tax), dismantle the administered pricing mechanism, reduce subsidies, and reorient expenditure toward national and state-level priorities. This is essential to ensure India remains on a sustainable fiscal path with higher growth, given the high public debt at the centre and state level. The observed wide differences in fiscal parameters across states require a tailored policy for each state. The large stock of debt of several states puts at risk the adequate financing of growth-enchancing expenditures.
Keywords:
India; Growth Convergence; Central and State Public Finances; development expenditure; State public finances; state level; public finances of India; Capital spending; Government debt management; Total expenditures; Global
Cover IMF How To Notes
How to Design and Implement Property Tax Reforms
Martin Grote
and
Jean-François Wen
Property taxes are often under-exploited sources of local public revenues. A broad-based tax, raised at modest rates, can potentially generate significantly higher revenues in many countries, and meet most of the costs of improved local public services. This note provides a practical guide to designing and implementing reforms to recurrent taxes on immoveable property and real estate transfer taxes. It addresses the fundamental policy choices regarding the property tax base and tax rate, and the key functions of the tax administration for managing collections – valuation, billing, and enforcement. The advice in the note stems from a review of the literature and insights gained from the experiences of the Fiscal Affairs Department in delivering capacity development on property taxes. It covers and updates some of the analytical work by Norregaard (2013) while providing granular advice on practical aspects of reforming property taxes. The note is motivated by the resource mobilization needs of developing countries, but the design considerations are also pertinent for advanced and emerging market economies seeking to increase the revenue productivity of property taxes.
Keywords:
property tax; recurrent tax; real estate; real property transfer tax; tax reform; implement property tax reform; property tax tax collection; revenue identity; property tax administration; property tax system; Tax administration core functions; Transaction tax; Estate tax; Africa
Cover IMF Staff Country Reports
Bhutan: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Bhutan
International Monetary Fund. Asia and Pacific Dept
The 2024 Article IV Consultation highlights that Bhutan achieved significant improvements in social conditions during the last decade, raising living standards. Poverty and inequality have declined, while extreme poverty has been eliminated. Growth is projected to accelerate over the medium term as a large hydro-project is commissioned and capital spending is boosted with the support of external grants. Pull factors are expected to slow down emigration, thereby reducing pressures on the supply side. A gradual fiscal consolidation based on revenue mobilization and accompanied by some spending restraint is needed to increase fiscal space and to reduce reliance on external grants in the longer term. Structural policies should focus on fostering high-quality private sector jobs, as well as diversifying exports. There is scope to strengthen the Royal Monetary Authority’s governance framework, as well as to step up anti-money laundering/countering the financing of terrorism efforts. Improvements in data quality have been significant, but further actions are needed to address remaining weaknesses. These include a need for greater transparency on crypto assets operations.
Keywords:
FDI company; foreign exchange resource; cover loan restructuring; capital investment; IMF team; Global
Cover Finance & Development
Finance & Development, September 2024: Productivity and How to Revive It
International Monetary Fund. Communications Department
Productivity must play a more important role in driving sustained growth as our societies age. But there’s no consensus on how to reverse the broad slowdown in productivity growth seen across almost all countries over the past 20 years. F&D magazine’s September issue invites leading thinkers to examine productivity from multiple angles, including dynamism, innovation, demographics, and sustainability.
Keywords:
Productivity; total factor productivity; demographics; sustainable growth; economic growth; dynamism; innovation; international cooperation.; productivity gain; understanding productivity growth; productivity growth rebound; IMF photo; low-productivity firm; TFP advancement; Emerging and frontier financial markets; Tax avoidance; Global; West Africa; Europe; Central Asia; Asia and Pacific
Cover Technical Assistance Reports
Sri Lanka: Technical Assistance Report-Property Taxation at the National and Subnational Level
International Monetary Fund. Fiscal Affairs Dept.
This report analyzes Sri Lanka’s options for improving the fairness and progressivity of the tax system through the introduction of a nationwide property tax. Given constitutional constraints that limit the taxation of property at the central government level, it recommends taxing the imputed rental value of owner-occupied housing. With a suitable exemption threshold and a progressive tax rate structure, such a tax can support fiscal consolidation by raising revenue from the most affluent members of Sri Lanka’s society while introducing little distortions. Implementation and enforcement of the tax will require substantive investments in data infrastructure, including through the introduction of a digital sales price and rents register. The report also outlines options for improving the fairness and revenue productivity of subnational assessment rates (local property taxes) and suggests additional reforms that can complement the taxation of real property at the national and subnational level.
Keywords:
Property taxation; Imputed rental income tax; Simplified assessment approach; Sri Lanka; Fiscal consolidation.; imputed rental income; central government; roll number; rental contract; market rental value; Property tax; Transaction tax; Income and capital gains taxes; Income; Global; Australia and New Zealand
Cover IMF Staff Country Reports
Nepal: Fourth Review Under the Extended Credit Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Nepal
International Monetary Fund. Asia and Pacific Dept
This paper focuses on Nepal’s Fourth Review under the Extended Credit Facility (ECF) Arrangement. Nepal has made good progress with implementation of the program, despite a challenging political environment. With growth below potential, executing the planned increase in capital spending, as envisaged in the FY24/25 budget, while maintaining fiscal discipline through domestic revenue mobilization and rationalization of current spending remains critical to boost growth and preserve medium-term fiscal sustainability. Monetary policy should maintain the current cautious, data-driven approach to preserving price and external stability. Avoiding further boom-bust credit cycles is critical to establish a more stable, pro-growth equilibrium. Continued progress on the structural front remains needed to foster investment and more inclusive growth. These include improving the business climate, building human capital, and continuing to improve social safety nets, in particular aiming for full execution of the child grant budget, followed by an expansion of the program to all districts in Nepal.
Keywords:
ECF arrangement; UML-NC coalition; Nepali authorities; ECF program implementation; accommodative monetary policy stance; Credit; Debt relief; Global; Asia and Pacific
Cover IMF Staff Country Reports
Union of the Comoros: Second Review under the Extended Credit Facility Arrangement and Request for a Waiver of Nonobservance of Performance Criterion-Press Release; Staff Report; and Statement by the Executive Director for the Union of Comoros
International Monetary Fund. African Dept.
This paper presents Union of Comoros’ Second Review under the Extended Credit Facility (ECF) Arrangement and Request for a Waiver of Nonobservance of Performance Criterion. Performance under Comoros’s economic reform program continues to be broadly satisfactory, and the authorities remain committed to the economic policies and reforms underpinning the ECF-supported program. Reforms are beginning to bear fruit, with visible signs of macroeconomic stabilization. However, Comoros continues to face the challenges of a small, fragile island state which requires steadfast program implementation and continued support from international partners. Monetary policy has contained inflation and ensured sufficient external buffers for Comoros and the stability of the peg. Continued efforts to stabilize the financial sector, including through the restructuring of the state-owned postal bank, addressing credit quality in the banking system, and strengthening banking supervision and resolution capacities are welcome. Support from international partners continues to be important for addressing the country’s large development needs and climate-related risks.
Keywords:
Comorian authorities; Union of the Comoros' Extended Credit Facility; government liquidity; customs administrations IT management systems; ECF arrangement; Arrears; Credit; Government debt management; East Africa; West Africa; Global; Middle East
Cover IMF Staff Country Reports
India: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for India
International Monetary Fund. Asia and Pacific Dept
The 2023 Article IV Consultation highlights that India is on track to be one of the fastest growing major economies in the world this year, underpinned by prudent macroeconomic policies. Nonetheless, the economy is facing global headwinds, including a global growth slowdown in an increasingly fragmented world. Policy priorities should focus on replenishing fiscal buffers, securing price stability, maintaining financial stability, and accelerating inclusive growth through comprehensive structural reforms while preserving debt sustainability. Elevated public debt calls for ambitious medium-term consolidation, while continuing to prioritize capital spending. This should be complemented with a sound medium-term fiscal framework to promote transparency and accountability and align policies with India’s development goals. In order to reap the benefits of demographic tailwinds, structural policy should focus on promoting high quality job-rich growth, underpinned by comprehensive reform in areas of education, health, land, agriculture, and labor markets, including measures to boost female labor force participation. Continuing investment in infrastructure, strengthening governance, and enhancing a sound business environment are critical.
Keywords:
policy priority; WPI base year; infrastructure program; CPI series; household inflation expectation; gross investment; policy recommendation; financial asset; FDI regime; fund approval; CPI weight; Inflation; Government debt management; Global
Cover Staff Discussion Notes
Transforming Public Finance Through GovTech
David Amaglobeli
,
Ruud A. de Mooij
,
Andualem Mengistu
,
Mariano Moszoro
,
Manabu Nose
,
Soheib Nunhuck
,
Sailendra Pattanayak
,
Lorena Rivero del Paso
,
Frankosiligi Solomon
,
Ms. Rebecca Sparkman
,
Hervé Tourpe
, and
Gerardo Uña
Digital divide across countries and within countries continues to persist and even increased when the quality of internet connection is considered. The note shows that many governments have not been able to harness the full potential of digitalization. Governments could play important role to facilitate digital adoption by intervening both on supply (investing in infrastructure) and demand side (increase internet affordability). The note also documents significant dividends from digital adoption for revenue collection and spending efficiency, and for outcomes in education, health and social safety nets. The note also emphasizes that digitalization is not a substitute for good governance and that comprehensive reform plans embedded in National Digital Strategies (NDS) combined with legal and institutional reforms are needed to ensure that governments can reap full benefits from digitalization and manage the risks appropriately.
Keywords:
GovTech; Digitalization; Inequality; Public Finance; Social Dividends; governance pillar; A. government strategy; assessment tool; A. digital divide; government transfer; staff discussion note SDN2023/004; management information system; government technology; PFM information systems; Caribbean; Middle East; North Africa; Global; Europe; Asia and Pacific
Cover IMF Staff Country Reports
Brazil: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper focuses on challenges and options for reform in Brazil. This paper discusses options to build on the new fiscal rule and enhance the fiscal framework. The new rule’s focus on revenues carries important implementation risks, and consolidation that is more ambitious is needed to achieve a downward debt path. Building on Brazil’s and cross-country experience with fiscal frameworks, this paper proposes options to build on the new fiscal rule and enhance the fiscal framework. The new proposed fiscal rule addresses important priorities of the new government and offers opportunities for gradual fiscal consolidation over an extended horizon, but important challenges remain. There is scope to shape a more comprehensive and integrated fiscal framework, leveraging specific advantages of rules. Further considerations to refine the proposed new fiscal rule include ensuring consistency of the spending rule and the primary balance targets, while making the latter more binding. The existing fiscal framework would also benefit from a strong fiscal anchor that puts debt on a firmly declining path, rebuilds buffers, and embeds a medium-term perspective. Further options to strengthen the framework include addressing the procyclical bias, coupled with institutionalizing the escape clause and considering a mechanism to smooth commodity revenues, and hardening budget constraints for subnational governments.
Keywords:
policy option; spending measure; implementation challenge; alternative investment scenario; climate strategy; Fiscal rules; Fiscal governance; Fiscal stance; Global; Caribbean; Europe