Federalism in India: Political Economy and Reforms

UCSC Economics Working Paper No. 484

31 Pages Posted: 26 Oct 2001

See all articles by M. Govinda Rao

M. Govinda Rao

Institute of Social and Economic Change (ISEC)

Nirvikar Singh

University of California, Santa Cruz

Date Written: September 2001

Abstract

The objective of this paper is to examine the nature of India's federal system, the reforms that have occurred over the last ten years, and what remains to be done. We begin by briefly describing the key federal institutions in India, focusing particularly on the mechanisms for center-state transfers. These transfers are quite large, and are the major explicit method for dealing with inequalities across constituent units of the federation. We then examine the evidence on how India's political economy has affected the practical workings of the transfer mechanisms. We next describe recent and potential reforms of the center-state transfer system, in the context of evidence of widening interstate economic disparities. This is followed by a consideration of broader actual and possible reforms in India's federal institutions, including tax assignments and local government reform. We conclude by relating our discussion to other dimensions of economic reform in India.

Keywords: Intergovernmental transfers, economic reform, convergence

JEL Classification: H1, H7, P26

Suggested Citation

Rao, M. Govinda and Singh, Nirvikar, Federalism in India: Political Economy and Reforms (September 2001). UCSC Economics Working Paper No. 484, Available at SSRN: https://ssrn.com/abstract=288352 or http://dx.doi.org/10.2139/ssrn.288352

M. Govinda Rao

Institute of Social and Economic Change (ISEC) ( email )

Nagarbhavi PO
Bangalore, 560072
India

Nirvikar Singh (Contact Author)

University of California, Santa Cruz ( email )

Department of Economics
E2 Building
Santa Cruz, CA 95064
United States
831-459-4093 (Phone)
831-459-5077 (Fax)

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