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Indian Federalism, Economic Reform and Globalization

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  • Nirvikar Singh

    (University of California, Santa Cruz)

  • T.N. Srinivasan

    (Yale University)

Abstract

In this paper we examine several dimensions of economic reform in India, in the context of the country’s federal system and of globalization, i.e., we explicitly recognize that the national government has subnational governments below it, and that all these layers of government simultaneously interact with foreign governments and corporations in a global economy. We examine two groups of reforms, the first involving redrawing of state-market boundaries, and the second concerned with reconfiguring federal institutions themselves. The first group includes financial sector reforms, assignment of regulatory powers, infrastructure reform and development, and privatization. We note the progress made in financial sector reform but also the problems caused for the financial sector as a whole by state and central fiscal deficits. We discuss the extreme problems of the power sector, and the important federal dimensions that make reform more difficult there. We also highlight the regional concentration of FDI in India’s more liberalized economy. The second group of reforms includes tax reforms, reform of center-state fiscal transfer mechanisms, and local government reforms. To some degree, these reforms in federal governance hold the key to opening the door to further reform elsewhere, by reducing the fiscal burden placed on the private sector by government deficits. We acknowledge the political economy aspects of reform of governance, and discuss possibilities for politically acceptable packages of fiscal reforms, such as combinations of changes in tax assignment that would be acceptable to the center as well as the state governments. We also discuss the possibility that growing regional inequalities might require the intergovernmental transfer system to be more efficient and effective in its objectives.

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File URL: http://128.118.178.162/eps/pe/papers/0412/0412007.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 0412007.

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Length: 55 pages
Date of creation: 07 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwppe:0412007

Note: Type of Document - pdf; pages: 55
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References

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  1. Singh, Nirvikar & Vasishtha, Garima, 2004. "Some Patterns in Center-State Fiscal Transfers in India: An Illustrative Analysis," Santa Cruz Center for International Economics, Working Paper Series qt1r02k470, Center for International Economics, UC Santa Cruz.
  2. Paul Cashin & Ratna Sahay, 1997. "Internal Migration, Center-State Grants, and Economic Growth in the States of India: A Reply to Rao and Sen," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 289-291, June.
  3. Paul Cashin & Ratna Sahay, 1995. "Internal Migration, Center-State Grants and Economic Growth in the States of India," IMF Working Papers 95/66, International Monetary Fund.
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Cited by:
  1. M. Govinda Rao & Nirvikar Singh, 2007. "The Political Economy of India's Fiscal Federal System and its Reform," Publius: The Journal of Federalism, Oxford University Press, vol. 37(1), pages 26-44, Winter.
  2. Peter Nunnenkamp & Rudi Stracke, 2008. "Foreign Direct Investment In Post-Reform India: Likely To Work Wonders For Regional Development?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 33(2), pages 55-84, December.
  3. Verma, Rubina, 2012. "Can total factor productivity explain value added growth in services?," Journal of Development Economics, Elsevier, vol. 99(1), pages 163-177.
  4. Nirvikar Singh, 2004. "Information Technology and India’s Economic Development," Development and Comp Systems 0412007, EconWPA.
  5. 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).
  6. Singh, Nirvikar, 2006. "Services-Led Industrialization in India: Assessment and Lessons," Santa Cruz Department of Economics, Working Paper Series qt8jn2b8z6, Department of Economics, UC Santa Cruz.
  7. Singh, Nirvikar, 2010. "The Dynamics and Status of India’s Economic Reforms," MPRA Paper 24479, University Library of Munich, Germany.
  8. Kendall, Jake, 2012. "Local financial development and growth," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1548-1562.
  9. 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.
  10. James Laurenceson & Abby Kamalankanthan, . "How important is foreign capital to income growth in China and India?," EAERG Discussion Paper Series 0405, School of Economics, University of Queensland, Australia.
  11. Chakraborty, Suparna, 2008. "Indian Economic Growth: Lessons for the Emerging Economies," Working Paper Series RP2008/67, World Institute for Development Economic Research (UNU-WIDER).

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