The Decentralization Dilemma in India

Author/Editor: Catriona Purfield
Publication Date: February 01, 2004
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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. 04/32
Subject(s): Debt | Fiscal policy | India | Intergovernmental fiscal relations

Author's Keyword(s): Fiscal Policy | intergovernmental fiscal relations | India | panel econometrics
Publication Date: February 01, 2004
ISBN/ISSN: 9781451845143/1018-5941 Format: Paper
Stock No: WPIEA0322004 Pages: 31
US$15.00 (Academic Rate:
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