Chadi Abdallah, David Coady, Sanjeev Gupta, and Emine Hanedar
INTERNATIONAL MONETARY FUND
Achieving fiscal consolidation without undermining growth and poverty-reduction efforts is
a key policy challenge in many countries. Using India as an illustration, this paper shows
how a mix of well-designed taxation and spending policies can help address these challenges.
On the tax side, the analysis focuses on increasing consumption taxes on goods with negative
consumption externalities. On the spending side, some of the additional revenues from the
tax reform are allocated to scaling up key social transfer programs. Substantial additional
gains are possible if the increased social transfers can be accompanied by improved targeting.