Incentivizing Fiscal Transfers in the Indian Federation

Govinda Rao

Publius: The Journal of Federalism, 2003, vol. 33, issue 4, 43-62

Abstract: The sharp deterioration in the fiscal health of the states has been a matter of concern for policymakers. The remedial measures recently taken include the institution of the Medium Term Fiscal Restructuring Policy (MTFRP), stipulating performance requirements for borrowing from the World Bank and the Asian Development Bank (ADB), and the Accelerated Power Development and Reform Program (APDRP). This article evaluates these schemes. The important conclusions are that (1) incentive-linked transfers are too small to make any difference to fiscal performances, (2) multiple schemes create segmented incentives, (3) there are serious problems of design, and (4) the schemes do not address the basic causes of deterioration in the states 'fiscal performance. Copyright 2003, Oxford University Press.

Date: 2003
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