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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," MPRA Paper 1281, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:1281
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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, University Library of Munich, Germany.
    3. World Bank, 2003. "India : Sustaining Reform, Reducing Poverty," World Bank Publications - Books, The World Bank Group, number 15046.
    4. Ricardo Hausmann & Catriona Purfield, 2004. "The Challenge of Fiscal Adjustment in a Democracy: The Case of India," Growth Lab Working Papers 2, Harvard's Growth Lab.
    5. World Bank, 2003. "India : Sustaining Reform, Reducing Poverty," World Bank Publications - Reports 14617, The World Bank Group.
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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.
    2. J.S. Darshini & K. Gayithri, 2023. "An Econometric Analysis of Revenue Diversification Among Selected Indian States," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 24(1), pages 41-63, March.
    3. Singh, Nirvikar, 2008. "Decentralization and Public Delivery of Health Care Services in India," MPRA Paper 7869, University Library of Munich, Germany.

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    More about this item

    Keywords

    fiscal policy; intergovernmental transfers; incentives; institutional reform;
    All these keywords.

    JEL classification:

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

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