The Political Economy of Indiaâ€™s Federal System and its Reform
This article examines the nature of Indiaâ€™s federal system, and recent and potential reforms in its structure and working. We summarize key federal institutions in India, focusing particularly on the mechanisms for Center-state transfers. These transfers are large, and are the major explicit method for dealing with inequalities across constituent units of the federation. We examine the evidence on how Indiaâ€™s political economy has affected the practical workings of the transfer mechanisms. This is followed by a consideration of actual and possible reforms in Indiaâ€™s federal institutions, including tax assignments and local government, and a discussion of how they might be implemented in a politically feasible manner.
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