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Fiscal Federalism and Decentralization in India

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  • Singh, Nirvikar

Abstract

This paper surveys the state of fiscal federalism in India, in the broader context of decentralization. We begin with an overview of the basic features and recent developments in intergovernmental fiscal relations, including the role of political institutions, the specifics of legislative and budgetary autonomy, assignments of expenditure responsibility and revenue authority, revenue collection mechanisms, the system of intergovernmental transfers, and institutions and mechanisms for borrowing by subnational units. We then provide a diagnosis of accountability mechanisms, examining their quality of functioning and distortions and constraints. In particular, we analyze to what extent, and through what mechanisms, lower-level governments are held accountable to higher-level governments, the extent to which policies of subnational governments are affected by the competition for mobile firms, taxpayers, and investment capital, the functioning of credit markets, including the responsiveness of subnational governments to credit ratings and bond yields, and the role of democratic electoral channels at national and subnational levels in providing accountability in the provision of subnational public goods. Next, we review the implications of the intergovernmental system and accountability mechanisms on the cooperation of subnational governments and the quality of service delivery. We examine the resources and capacity of the subnational entities that are responsible for key services such as water, sanitation, education and health care, and the impacts of decentralization on service quality and the distribution of benefits among elected officials, citizens and interest groups. Finally, we offer a concluding assessment with suggestions for reform priorities.

Suggested Citation

  • Singh, Nirvikar, 2007. "Fiscal Federalism and Decentralization in India," MPRA Paper 1447, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:1447
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    References listed on IDEAS

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    Cited by:

    1. Nagarajan, Hari K. & Deininger, Klaus & Jin, Songqing, 2011. "Can political reservations affect political equilibria in the long-term? Evidence from local elections in rural India," Proceedings of the German Development Economics Conference, Berlin 2011 59, Verein für Socialpolitik, Research Committee Development Economics.
    2. Singh, Nirvikar, 2010. "The Dynamics and Status of India’s Economic Reforms," MPRA Paper 24479, University Library of Munich, Germany.
    3. Singh, Nirvikar, 2008. "India’s Development Strategy: Accidents, Design and Replicability," MPRA Paper 12453, University Library of Munich, Germany.
    4. Klaus Deininger & Songqing Jin & Hari K. Nagarajan & Fang Xia, 2015. "Does Female Reservation Affect Long-Term Political Outcomes? Evidence from Rural India," Journal of Development Studies, Taylor & Francis Journals, vol. 51(1), pages 32-49, January.
    5. Singh, Nirvikar, 2008. "Holding India together: The role of institutions of federalism," MPRA Paper 12432, University Library of Munich, Germany.

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    More about this item

    Keywords

    federalism; decentralization; intergovernmental relations; economic reform; accountability; service delivery;
    All these keywords.

    JEL classification:

    • P35 - Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H4 - Public Economics - - Publicly Provided Goods
    • H1 - Public Economics - - Structure and Scope of Government

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