| Abstract: | The sharp deterioration in the fiscal health of the states hasbeen a matter of concern for policymakers. The remedial measuresrecently taken include the institution of the Medium Term FiscalRestructuring Policy (MTFRP), stipulating performance requirementsfor borrowing from the World Bank and the Asian DevelopmentBank (ADB), and the Accelerated Power Development and ReformProgram (APDRP). This article evaluates these schemes. The importantconclusions are that (1) incentive-linked transfers are toosmall to make any difference to fiscal performances, (2) multipleschemes create segmented incentives, (3) there are serious problemsof design, and (4) the schemes do not address the basic causesof deterioration in the states 'fiscal performance. |
