Macroeconomic stability is an indispensable precondition for growth. Like most of the states of India, the fiscal situation of Orissa deteriorated in the late 1980s and the 1990s. The enactment of the FRBM Act in 2005 helped the Government of Orissa to reduce deficits and generate surplus. The planners should now identify the avenues of revenue to sustain this surplus over the years.

Contrasting forces, some leading to increased fiscal centralization and some to greater decentralization, are producing an ongoing restructuring of public sectors throughout the world. In many industrialized and developing countries, major programs have been introduced to shift decision making from the center to provincial and local governments. In the developing nations, such restructuring has been, in part, a response to the failure of centralized planning to bring the sustained growth that was one of its major objectives (Oates, 2005).

Macroeconomic stability is an indispensable precondition for growth. Reasonable price stability is an essential aspect of macroeconomic stability. Price stability requires budget deficits to be low. Fiscal reform in the recent years dates back to the Washington consensus as proposed by Williamson (1990). The Washington consensus has 10 propositions. The reforms included in the Washington consensus are necessary but not sufficient for promoting development. Out of these, the first three reforms were widely accepted among economists (only the three also have relevance in the present context).

They are: (1) fiscal discipline; (2) reorientation of public expenditure; and (3) tax reforms. In the case of intergovernmental relations, the recent evolution of theory has been rapid and substantial. The traditional normative approach was based on the assumption of a benevolent government. Recent literature drops this assumption and takes governments, politicians and officials as self interested players. Thus the normative approach has largely given way to a political economy approach (Ahmad and Brosio, 2008). This emphasizes the importance of institutional arrangement, including legal, political and administrative aspects and information flows to ensure that there are appropriate incentives and sanctions to generate good governance. Intergovernmental fiscal relations pose different challenges according to the distinct economic and societal characteristics of each country. In developing countries, decentralization has been promoted by some multilateral agencies and bilateral donors as an instrument for improving service delivery in sectors which are crucial for the alleviation of poverty.

Public Finance journal, Tax Buoyancy, Corporation Tax in Pre- and Post-Liberalization Periods, Economic Policy, Financial Reforms, Corporation Income Taxation, Economic Development, Gross Domestic Product, GDP, Linear Regression Equation, Augmented Dickey-Fuller, Vector Error Correction Mechanism, Domestic Companies, Corporate Development.