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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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    1. R. Nagaraj & A. Varoudakis & M.-A. Véganzonès, 2000. "Long-run growth trends and convergence across Indian States," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(1), pages 45-70.
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    3. Dixit, Avinash & Londregan, John, 1998. "Fiscal federalism and redistributive politics," Journal of Public Economics, Elsevier, vol. 68(2), pages 153-180, May.
    4. repec:ind:nipfwp:20 is not listed on IDEAS
    5. World Bank, 2004. "India : Fiscal Decentralization to Rural Governments," World Bank Publications - Reports 14674, The World Bank Group.
    6. repec:npf:wpaper:20 is not listed on IDEAS
    7. 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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    1. 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.
    2. United Cities and Local Governments, 2011. "Local Government Finance," Books, Edward Elgar Publishing, number 14696, March.
    3. 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.
    4. 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).
    5. Singh, Nirvikar & Srinivasan, T.N., 2006. "Federalism and economic development in India:An assessment," MPRA Paper 1273, University Library of Munich, Germany.
    6. Hernandez-Trillo, Fausto, 2016. "Poverty Alleviation in Federal Systems: The Case of México," World Development, Elsevier, vol. 87(C), pages 204-214.
    7. 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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