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The Decentralization Dilemma in India

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  • Miss Catriona Purfield

Abstract

Already in precarious shape, the financial health of India’s states took a turn for the worse in the late 1990s when state deficits and debt rose sharply. While India is among the world’s most decentralized economies, greater decentralization is not the root cause of this situation. Panel estimation techniques find evidence that the trend rise in deficits reflects problems of transfer dependence and moral hazard that undermine states’ incentives to control deficits.

Suggested Citation

  • Miss Catriona Purfield, 2004. "The Decentralization Dilemma in India," IMF Working Papers 2004/032, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2004/032
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    Cited by:

    1. Mr. Ananthakrishnan Prasad & Mr. Adarsh Kishore, 2007. "Indian Subnational Finances: Recent Performance," IMF Working Papers 2007/205, International Monetary Fund.
    2. Jorge Martinez-Vazquez & Violeta Vulovic, 2017. "How well do subnational borrowing regulations work?," Chapters, in: Naoyuki Yoshino & Peter J. Morgan (ed.), Central and Local Government Relations in Asia, chapter 5, pages 161-220, Edward Elgar Publishing.
    3. Mr. Ricardo Hausmann & Miss Catriona Purfield, 2004. "The Challenge of Fiscal Adjustment in a Democracy: The Case of India," IMF Working Papers 2004/168, International Monetary Fund.
    4. Violeta Vulovic, 2010. "The effect of sub-national borrowing control on fiscal sustainability: How to regulate?," Working Papers 2010/36, Institut d'Economia de Barcelona (IEB).
    5. World Bank, 2004. "Stabilization and Fiscal Empowerment : The Twin Challenges Facing India's States, Volume 2. Detailed Report," World Bank Publications - Reports 16775, The World Bank Group.
    6. Singh, Nirvikar, 2008. "Holding India together: The role of institutions of federalism," MPRA Paper 12432, University Library of Munich, Germany.
    7. Marco Rizzi, 2017. "The Evolution of Consumer Product Safety Policy and Regulation in India," Journal of Consumer Policy, Springer, vol. 40(3), pages 389-412, September.
    8. Roy Bahl & Geeta Sethi & Sally Wallace, 2009. "West Bengal: Fiscal Decentralization to Rural Governments: Analysis and Reform Options," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0907, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    9. Fraschini, Angela, 2006. "Fiscal federalism in big developing countries: China and India," POLIS Working Papers 60, Institute of Public Policy and Public Choice - POLIS.
    10. Darshini J S & K Gayithri, 2019. "Fiscal dependency of States in India," Working Papers 433, Institute for Social and Economic Change, Bangalore.

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