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The Political Economy of India’s Fiscal Federal System and its Reform

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  • Rao, M. Govinda
  • Singh, Nirvikar

Abstract

This article examines recent and potential reforms in India’s fiscal federal system. We summarize key federal institutions in India, including tax and expenditure assignments, and mechanisms for Center-state transfers. We discuss the institutional process by which reforms can and do take place, including the role of academics, political influences, and especially institutions such as the Finance Commission. In contrast to the past, recent commissions have played a greater role in articulating an agenda for fiscal federal reform, which then proceeds through political bargaining. This change has taken place in the context of, and been influenced by, broader economic reform in India.

Suggested Citation

  • Rao, M. Govinda & Singh, Nirvikar, 2006. "The Political Economy of India’s Fiscal Federal System and its Reform," Santa Cruz Department of Economics, Working Paper Series qt3xf1752z, Department of Economics, UC Santa Cruz.
    • Handle: RePEc:cdl:ucscec:qt3xf1752z
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    References listed on IDEAS

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    6. Nirvikar Singh & T.N. Srinivasan, 2004. "Indian Federalism, Economic Reform and Globalization," Public Economics 0412007, University Library of Munich, Germany.
    7. Dixit, Avinash & Londregan, John, 1998. "Fiscal federalism and redistributive politics," Journal of Public Economics, Elsevier, vol. 68(2), pages 153-180, May.
    8. World Bank, 2004. "India : Fiscal Decentralization to Rural Governments," World Bank Publications - Reports 14674, The World Bank Group.
    9. Kaliappa Kalirajan & Ulaganathan Sankar (ed.), 2003. "Economic Reform and the Liberalisation of the Indian Economy," Books, Edward Elgar Publishing, number 2787, March.
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    Cited by:

    1. Saibal Ghosh, 2010. "Does Political Competition Matter for Economic Performance? Evidence from Sub‐national Data," Political Studies, Political Studies Association, vol. 58(5), pages 1030-1048, December.
    2. Stotsky, Janet G. & Chakraborty, Lekha & Gandhi, Piyush, 2018. "Impact of Intergovernmental Fiscal Transfers on Gender Equality in India: An Empirical Analysis," Working Papers 18/240, National Institute of Public Finance and Policy.
    3. Afridi, Farzana & Dhillon, Amrita & Roy Chaudhuri, Arka & Saattvic,, 2022. "Measuring performance: Ranking state success over two decades in India," Journal of Asian Economics, Elsevier, vol. 83(C).
    4. Ritika Jain, 2018. "Contributions to the exchequer funds by state level public sector enterprises: does political alignment matter?," Constitutional Political Economy, Springer, vol. 29(1), pages 93-113, March.
    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. Singh, Nirvikar, 2007. "Fiscal Decentralization in China and India: Competitive, Cooperative or Market Preserving Federalism?," Santa Cruz Department of Economics, Working Paper Series qt76d8b4hm, Department of Economics, UC Santa Cruz.
    7. Singh, Nirvikar & Srinivasan, T.N., 2006. "Federalism and economic development in India:An assessment," MPRA Paper 1273, University Library of Munich, Germany.
    8. K. S. Harikrishnan & Gourishankar S. Hiremath, 2023. "Asymmetric Fiscal Federalism and Public Provision of Healthcare: New Insights from India," Indian Journal of Human Development, , vol. 17(3), pages 420-438, December.
    9. United Cities and Local Governments, 2011. "Local Government Finance," Books, Edward Elgar Publishing, number 14696, March.
    10. Abishek Choutagunta & G. P. Manish & Shruti Rajagopalan, 2021. "Battling COVID‐19 with dysfunctional federalism: Lessons from India," Southern Economic Journal, John Wiley & Sons, vol. 87(4), pages 1267-1299, April.
    11. Sharma, Chanchal Kumar, 2021. "The political economy of India's transition to Goods and Services Tax," GIGA Working Papers 325, GIGA German Institute of Global and Area Studies.
    12. Pinaki Chakraborty & Shatakshi Garg, 2018. "Fiscal pressure of migration & horizontal fiscal inequality: Evidence from Indian experience," WIDER Working Paper Series 004, World Institute for Development Economic Research (UNU-WIDER).
    13. Alessandrini, Michele & Buccellato, Tullio & Scaramozzino, Pasquale, 2008. "Whither the Indian Federation? Regional Disparities and Economic Reforms," MPRA Paper 23416, University Library of Munich, Germany.
    14. Hernandez-Trillo, Fausto, 2016. "Poverty Alleviation in Federal Systems: The Case of México," World Development, Elsevier, vol. 87(C), pages 204-214.
    15. Parantap Basu & Ritwik Mazumder, 2021. "Regional disparity of covid-19 infections: an investigation using state-level Indian data," Indian Economic Review, Springer, vol. 56(1), pages 215-232, June.

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    More about this item

    Keywords

    intergovernmental transfers; economic reform; federalism; regional inequalities;
    All these keywords.

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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