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State Finances in India: A Case for Systemic Reform

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  • Singh, Nirvikar

Abstract

This paper provides a self-contained overview of the present problems of state finances in India. It begins with an overview of historical evolution and current institutional structures, including economic, political, administrative and fiscal aspects of India’s federal system. The paper then reviews the current situation of India’s state government finances, going on to consider various developments that have shaped the states’ current fiscal situation, including the roles of national economic reform, the intergovernmental transfer system, tax reform, and local government reform. Policy options for reforming institutions of fiscal federalism system, borrowing mechanisms for the states, and governance are then discussed, with an emphasis on the principle that states should have appropriate incentives for fiscal discipline at the margins of revenue and expenditure.

Suggested Citation

  • Singh, Nirvikar, 2006. "State Finances in India: A Case for Systemic Reform," Santa Cruz Department of Economics, Working Paper Series qt8560h76z, Department of Economics, UC Santa Cruz.
  • Handle: RePEc:cdl:ucscec:qt8560h76z
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    References listed on IDEAS

    as
    1. Khemani, Stuti, 2002. "Federal politics and budget deficits: evidence from the states of India," Policy Research Working Paper Series 2915, The World Bank.
    2. Alan Richards & Nirvikar Singh, 2004. "Inter State Water Disputes in India: Institutions and Policies," Development and Comp Systems 0412010, EconWPA.
    3. Ricardo Hausmann & Catriona Purfield, 2004. "The Challenge of Fiscal Adjustment in a Democracy; The Case of India," IMF Working Papers 04/168, International Monetary Fund.
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    Cited by:

    1. Singh, Nirvikar, 2007. "Fiscal Federalism and Decentralization in India∗," Santa Cruz Department of Economics, Working Paper Series qt11b543tk, Department of Economics, UC Santa Cruz.

    More about this item

    Keywords

    fiscal policy; intergovernmental transfers; incentives; institutional reform;

    JEL classification:

    • P2 - Economic Systems - - Socialist Systems and Transition Economies
    • H1 - Public Economics - - Structure and Scope of Government
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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