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Federalism and Economic Development in India: An Assessment

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  • Singh, Nirvikar
  • SRINIVASAN, T N

Abstract

This paper examines India’s federal system in the context of prospects for India’s future economic growth and development. After a brief review of India’s recent policy reforms and economic development outcomes, and of the country’s federal institutions, the analysis focuses on the major issues with respect to India’s federal system in terms of their developmental consequences. We examine the impacts of tax assignments, expenditure authority and the intergovernmental transfer system on the following aspects of India’s economy and economic performance: the quality of governance and government expenditure, the efficiency of the tax system, the fiscal health of different tiers of government, and the impacts on growth and on regional inequality. In each case, we discuss recent and possible policy reforms. We make comparisons with China’s federal system where this is instructive for analyzing the Indian case. Finally, we provide a discussion of potential reforms of aspects of India’s federal institutions.

Suggested Citation

  • Singh, Nirvikar & SRINIVASAN, T N, 2006. "Federalism and Economic Development in India: An Assessment," Santa Cruz Department of Economics, Working Paper Series qt2qs4h3t9, Department of Economics, UC Santa Cruz.
    • Handle: RePEc:cdl:ucscec:qt2qs4h3t9
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    References listed on IDEAS

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    1. M. Govinda Rao & R. Kavita Rao, 2005. "Trends and Issues in Tax Policy and Reform in India," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 2(1), pages 55-122.
    2. Govinda Rao, 2006. "Fiscal Federalism in Planned Economies," Chapters, in: Ehtisham Ahmad & Giorgio Brosio (ed.), Handbook of Fiscal Federalism, chapter 9, Edward Elgar Publishing.
    3. Yuanzheng Cao & Yingyi Qian & Barry R. Weingast, 1999. "From federalism, Chinese style to privatization, Chinese style," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(1), pages 103-131, March.
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    6. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922, September.
    7. Rao, M. Govinda & Rao, R. Kavita, 2006. "Trends and Issues in Tax Policy and Reform in India," India Policy Forum, National Council of Applied Economic Research, vol. 2(1), pages 55-122.
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    Cited by:

    1. Shen, Yanyan & Guo, Feng & Li, Zhen, 2024. "Unintended effects of tax-sharing adjustments on firms' pollution emissions: Evidence from China," Energy Economics, Elsevier, vol. 139(C).
    2. Isaac Otoo & Michael Danquah, 2021. "Fiscal decentralization and efficiency of public services delivery by local governments in Ghana," African Development Review, African Development Bank, vol. 33(3), pages 411-425, September.
    3. Rongili Biswas & Sugata Marjit & Velayoudom Marimoutou, 2010. "Fiscal Federalism, State Lobbying And Discretionary Finance: Evidence From India," Economics and Politics, Wiley Blackwell, vol. 22(1), pages 68-91, March.
    4. Boris I. Alekhin, 2020. "Regional Tax Autonomy and Budget Balances," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 114-127, October.
    5. Nirvikar Singh, 2007. "The dynamics of reform of India’s federal system," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(01), pages 22-31, April.
    6. Bharatee Dash & Angara Raja, 2014. "Do political determinants affect revenue collection? Evidence from the Indian states," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 61(3), pages 253-278, September.
    7. Yongzheng Liu & Bingyang Lv & Hang Tai & Chenping Yang, 2018. "Fiscal Incentives and Local Tax Competition: Evidence from China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1817, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    8. Boris I. Alekhin, 2020. "Vertical Fiscal Imbalance and Regional Economic Growth," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 39-53, December.
    9. Han, Li & Kung, James Kai-Sing, 2015. "Fiscal incentives and policy choices of local governments: Evidence from China," Journal of Development Economics, Elsevier, vol. 116(C), pages 89-104.
    10. Jean-François Brun & Maria El Khdari, 2016. "The Incentive Effects of Conditional and Unconditional Transfers on Local Own Revenue Generation: Empirical Evidence from Moroccan Municipalities," Working Papers halshs-01285021, HAL.
    11. Abhishek Anand & Lekha S. Chakraborty, 2016. "'Engendering' Intergovernmental Transfers: Is There a Case for Gender-sensitive Horizontal Fiscal Equalization?," Economics Working Paper Archive wp_874, Levy Economics Institute.
    12. Sorens, Jason, 2016. "Vertical Fiscal Gaps and Economic Performance: A Theoretical Review and an Empirical Meta-analysis," Working Papers 06856, George Mason University, Mercatus Center.
    13. Singh, Nirvikar, 2006. "Services-led industrialization in India: Assessment and lessons," MPRA Paper 1276, University Library of Munich, Germany.
    14. Yongzheng Liu & Hang Tai & Chenping Yang, 2020. "Fiscal incentives and local tax competition: Evidence from China," The World Economy, Wiley Blackwell, vol. 43(12), pages 3340-3356, December.
    15. Weingast, Barry R., 2009. "Second generation fiscal federalism: The implications of fiscal incentives," Journal of Urban Economics, Elsevier, vol. 65(3), pages 279-293, May.
    16. 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.
    17. Economou, Emmanouel/Marios/Lazaros & Kyriazis, Nicholas, 2014. "Achaeans, Indians and Europeans: A Comparison of federations," MPRA Paper 57289, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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