Module 1: Rationale for Public Policy
Allocation of resources – Provision of public goods; Voluntary exchange models; Impossibility of
decentralized provision of public goods (contributions of Samuelson and Musgrave); Demand
revealing schemes for public goods – Tiebout model, theory of club goods; Stabilization Policy –
Keynesian case of stabilization policy; Uncertainty and expectations; Failure of inter temporal
markets; Liquidity preference; Social goals; Poverty alleviation; Provision of infrastructural
facilities, removing distributional inequalities and regional imbalances.
Module 2: Public Expenditure
Wagner’s law of increasing state activities; Wiseman-Peacock hypothesis; Pure theory of
public expenditure; Structure and growth of public expenditure; Criteria for public investment;
Social cost-benefit analysis – Project evaluation; Estimation of costs, discount rate; Reforms in
expenditure budgeting; Programme budgeting and Zero base budgeting.
Module 3: Taxation
Theory of incidence; Alternative concepts of incidence – Allocative and equity aspects of individual
taxes; Benefit and ability to pay approaches; Theory of optimal taxation; Excess burden of taxes;
Trade-off between equity and efficiency; Theory of measurement of dead weight losses; The
problem of double taxation.
Module 4: Public Debt
Classical view of public debt; Compensatory aspect of debt policy; Burden of public debt; Sources of
public debt; Debt through created money; Public borrowings and price level; Crowding out of
private investment and activity; Principles of debt management and repayment.
Module 5: Fiscal Policy
Objectives of fiscal policy – full employment, anti-inflation, economic growth, redistribution of
income and wealth; Interdependence of fiscal and monetary policies; Budgetary deficit and its
implications; Fiscal policy for stabilization – Automatic vs discretionary stabilization; Alternative
measures of resource mobilization and their impact on growth, distribution and prices; Balanced
Module 6: Fiscal Federalizm
Principles of multi-unit finance; Fiscal federalism in India; Vertical and horizontal imbalances;
Assignment of function and sources of revenue; Constitutional provisions; Finance Commission;
Devolution of resources and grants; Theory of grants; Resource transfer from Union to States –
Criteria for transfer of resources; Centre-State financial relations in India; Problems of
states’resources and indebtedness; Transfer of resources from Union and States to local bodies.