Effective resource mobilisation requires India to balance the objectives of revenue generation, fiscal sustainability and equitable distribution while minimising distortions in economic activity.” Examine. (10 Marks) (GS 3: Indian Economy — Resource Mobilisation)

Introduction

Resource mobilisation enables the State to finance public goods, infrastructure and welfare while maintaining macroeconomic stability. For India, the challenge is to raise adequate revenues without discouraging investment, consumption or productive activity.

Key challenges in resource mobilisation

1. Narrow tax base: A relatively limited proportion of economic activity contributes directly to direct-tax revenues, increasing dependence on indirect taxation.
   Data: The Economic Survey has repeatedly highlighted the need to broaden the tax base and improve tax compliance.
2. High dependence on indirect taxes: Indirect taxation can have a relatively greater burden on lower-income households.
   Example: GST has unified the indirect-tax framework, while its multiple rate structure continues to require rationalisation.
3. Fiscal sustainability: Persistent fiscal deficits and rising public debt can constrain future fiscal space.
   Report: The 15th Finance Commission recommended fiscal consolidation alongside sustained public investment.
4. Subsidy burden: Poorly targeted subsidies can divert resources from productive expenditure and create fiscal pressures.
   Example: DBT has sought to reduce leakages and improve targeting of welfare expenditure.
5. Low non-tax mobilisation: Under-utilisation of public assets and inefficient pricing of public services can limit non-tax revenue.
   Example: National Monetisation Pipeline seeks to unlock value from brownfield public infrastructure assets.
6. Compliance and informality: Informal economic activity makes income assessment and tax compliance more difficult.
   Example: Digitisation of transactions and GST-based formalisation have strengthened the tax information ecosystem.

Measures for balanced resource mobilisation

1. Broaden the direct-tax base through better compliance and data-driven administration.
2. Rationalise GST while protecting essential consumption from excessive taxation.
3. Prioritise productive expenditure towards infrastructure, health, education and human capital.
4. Improve subsidy targeting through DBT and outcome-based expenditure monitoring.
5. Mobilise public assets efficiently through transparent asset monetisation and appropriate PPP models.
6. Strengthen cooperative fiscal federalism by ensuring predictable and equitable resource transfers to States.

Conclusion

India’s resource mobilisation strategy must move beyond maximising revenue towards maximising developmental value per rupee mobilised, combining wider tax compliance, prudent borrowing, efficient expenditure and equitable fiscal institutions.