Fiscal Federalism, State Lobbying And Discretionary Finance: Evidence From India

Rongili Biswas, Sugata Marjit and Velayoudom Marimoutou
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Rongili Biswas: University of Eastern Piedmont
Velayoudom Marimoutou: IFP - Institut Français de Pondichéry - MEAE - Ministère de l'Europe et des Affaires étrangères - CNRS - Centre National de la Recherche Scientifique, GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, University of the Mediterranean

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Abstract: In the quasi-federal democratic polity that India has, lobbying for central funds by the states is often done in a subliminal fashion. Hence, it becomes difficult to get an account of how much lobbying has been done to a particular end. Our paper attempts at constructing certain political proxy variables to quantify the extent of such lobbying in India. We quantify lobbying through the ministerial representation in the council of ministers. We also use several time and state dummies to account for the constituent states' political alignment with the center as well as the coalition and the reform period breaks in the Indian system. Taking panel data that cover 29 years and 14 major states we show that our constructed variables do explain disparity in central fiscal disbursements under the non-formulaic "discretionary" head in a robust way. Our findings remain true even after we take into account the impact of endogeneity of net state income on the transfers. Additionally, our exercise brings to the fore the fact that the coalition governments and economic reform measures impact upon state lobbying at the center in a significant manner.

Keywords: Fedralism; Discretionary finance; India (search for similar items in EconPapers)
Date: 2010-03
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Citations: View citations in EconPapers (3)

Published in Economics and Politics, 2010, 22 (1), pp.68-91. ⟨10.1111/j.1468-0343.2009.00363.x⟩

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Journal Article: FISCAL FEDERALISM, STATE LOBBYING AND DISCRETIONARY FINANCE: EVIDENCE FROM INDIA (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03237540

DOI: 10.1111/j.1468-0343.2009.00363.x

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