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Invisible Transfers in Indian Federalism


  • Rao, M Govinda


In most federal countries, design of intergovernmental transfers do not take into account violation of horizontal equity due to invisible transfers. Such subterranean transfers can be significant and they occur due to inter-state tax exportation arising from the levy of resource based (as against residence based) taxes and subsidised loans given to the states by the central government and the public sector banking system. This study estimates the volume of invisible transfers due to subsidised lending to states in India and demonstrates that such transfers have significantly reduced the progressivity of explicit intergovernmental transfers.
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Suggested Citation

  • Rao, M Govinda, 1997. "Invisible Transfers in Indian Federalism," Public Finance = Finances publiques, , vol. 52(3-4), pages 429-448.
  • Handle: RePEc:pfi:pubfin:v:52:y:1997:i:3-4:p:429-48

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    References listed on IDEAS

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    Cited by:

    1. Pinto, Brian & Zahir, Farah, 2004. "India : why fiscal adjustment now," Policy Research Working Paper Series 3230, The World Bank.
    2. M. Govinda Rao & Sen, Tapas Kumar & Jena, Pratap R., 2008. "Issues before the thirteenth finance commission," Working Papers 08/55, National Institute of Public Finance and Policy.
    3. M. Govinda Rao, 2005. "Transition to market and normative framework of fiscal federalism," Working Papers 05/36, National Institute of Public Finance and Policy.
    4. World Bank, 2004. "Stabilization and Fiscal Empowerment : The Twin Challenges Facing India's States, Volume 2. Detailed Report," World Bank Other Operational Studies 16775, The World Bank.

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