The Decentralization Dilemma in India

Author/Editor:

Catriona Purfield

Publication Date:

February 1, 2004

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Already in precarious shape, the financial health of India’s states took a turn for the worse in the late 1990s when state deficits and debt rose sharply. While India is among the world’s most decentralized economies, greater decentralization is not the root cause of this situation. Panel estimation techniques find evidence that the trend rise in deficits reflects problems of transfer dependence and moral hazard that undermine states’ incentives to control deficits.

Series:

Working Paper No. 2004/032

Subject:

Budget planning and preparation Central government spending Expenditure General government spending Government debt management Public financial management (PFM) Tax incentives

English

Publication Date:

February 1, 2004

ISBN/ISSN:

9781451845143/1018-5941

Stock No:

WPIEA0322004

Pages:

31

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