The Political Economy of India's Fiscal Federal System and its Reform

This article examines recent and potential reforms in India'sfiscal federal system. We summarize key federal institutionsin India, including tax and expenditure assignments, and mechanismsfor Center–state transfers. We discuss the institutionalprocess by which reforms can and do take place, including therole of academics, political influences, and especially institutionssuch as the Finance Commission. In contrast to the past, recentcommissions have played a greater role in articulating an agendafor fiscal federal reform, which then proceeds through politicalbargaining. This change has taken place in the context of, andbeen influenced by, broader economic reform in India.