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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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1273.

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Date of creation: Oct 2006
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Handle: RePEc:pra:mprapa:1273
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Find related papers by 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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  1. Singh, Nirvikar, 2007. "Fiscal Decentralization in China and India: Competitive, Cooperative or Market Preserving Federalism?," MPRA Paper 1705, University Library of Munich, Germany.
  2. Galeotti, Gianluigi & Breton, Albert, 1986. "An Economic Theory of Political Parties," Kyklos, Wiley Blackwell, vol. 39(1), pages 47-65.
  3. Dani Rodrik & Arvind Subramanian, 2004. "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition," NBER Working Papers 10376, National Bureau of Economic Research, Inc.
  4. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  5. Singh, Nirvikar, 2006. "Services-led industrialization in India: Assessment and lessons," MPRA Paper 1276, University Library of Munich, Germany.
  6. M. Govinda Rao & Nirvikar Singh, 2007. "The Political Economy of India's Fiscal Federal System and its Reform," Publius: The Journal of Federalism, Oxford University Press, vol. 37(1), pages 26-44, Winter.
  7. S. Mahendra Dev, 2008. "India," Chapters, in: Handbook on the South Asian Economies, chapter 1 Edward Elgar Publishing.
  8. M. Govinda Rao & Rao, R. Kavita, 2005. "Trends and issues in tax policy and reform in India," Working Papers tru1, National Institute of Public Finance and Policy.
  9. Roy Bahl & Jorge Martinez-Vazquez, 2003. "Fiscal Federalism and Economic Reform in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0313, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  10. Govinda Rao, 2006. "Fiscal Federalism in Planned Economies," Chapters, in: Handbook of Fiscal Federalism, chapter 9 Edward Elgar Publishing.
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Cited by:

  1. Li Han & James Kung, 2015. "Fiscal Incentives and Policy Choices of Local Governments, Evidence from China," HKUST IEMS Working Paper Series 2015-13, HKUST Institute for Emerging Market Studies, revised Mar 2015.
  2. 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.
  3. 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.
  4. 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(1), pages 22-31, 04.
  5. 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.
  6. Singh, Nirvikar, 2007. "The Dynamics of Reform of India’s Federal System," Santa Cruz Department of Economics, Working Paper Series qt9gh5p65t, Department of Economics, UC Santa Cruz.

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