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Fiscal Federalism and Decentralization in India

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  • Singh, Nirvikar

Abstract

This paper surveys the state of fiscal federalism in India, in the broader context of decentralization. We begin with an overview of the basic features and recent developments in intergovernmental fiscal relations, including the role of political institutions, the specifics of legislative and budgetary autonomy, assignments of expenditure responsibility and revenue authority, revenue collection mechanisms, the system of intergovernmental transfers, and institutions and mechanisms for borrowing by subnational units. We then provide a diagnosis of accountability mechanisms, examining their quality of functioning and distortions and constraints. In particular, we analyze to what extent, and through what mechanisms, lower-level governments are held accountable to higher-level governments, the extent to which policies of subnational governments are affected by the competition for mobile firms, taxpayers, and investment capital, the functioning of credit markets, including the responsiveness of subnational governments to credit ratings and bond yields, and the role of democratic electoral channels at national and subnational levels in providing accountability in the provision of subnational public goods. Next, we review the implications of the intergovernmental system and accountability mechanisms on the cooperation of subnational governments and the quality of service delivery. We examine the resources and capacity of the subnational entities that are responsible for key services such as water, sanitation, education and health care, and the impacts of decentralization on service quality and the distribution of benefits among elected officials, citizens and interest groups. Finally, we offer a concluding assessment with suggestions for reform priorities.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1447.

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Date of creation: Jan 2007
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Handle: RePEc:pra:mprapa:1447

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Keywords: federalism; decentralization; intergovernmental relations; economic reform; accountability; service delivery;

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Citations

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Cited by:
  1. Singh, Nirvikar, 2009. "India's Development Strategy: Accidents, Design and Replicability," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. Deininger, Klaus & Jin, Songqing & Nagarajan, Hari K. & Fang, Xia, 2011. "Does female reservation affect long-term political outcomes ? Evidence from rural India," Policy Research Working Paper Series 5708, The World Bank.
  3. Singh, Nirvikar, 2008. "Holding India together: The role of institutions of federalism," MPRA Paper 12432, University Library of Munich, Germany.
  4. Singh, Nirvikar, 2010. "The Dynamics and Status of India’s Economic Reforms," MPRA Paper 24479, University Library of Munich, Germany.
  5. Nagarajan, Hari K. & Deininger, Klaus & Jin, Songqing, 2011. "Can political reservations affect political equilibria in the long-term? Evidence from local elections in rural India," Proceedings of the German Development Economics Conference, Berlin 2011 59, Verein für Socialpolitik, Research Committee Development Economics.

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