Limits Of Ad Hoc Fiscal Federalism

Efficient intergovernmental competition requires a measure of competitive equality so that one state does not pass on the burden of its schemes to non-residents. Unless this is ensured, the more powerful actors can ride over the rest 

The diverse nature of Indian economy, society and polity calls for a high degree of decentralisation in decision making. However, a striking feature of Indian fiscal federalism is its high degree of centralisation. The heavy centripetal bias inherent in the constitutional assignment was compounded by centralised development strategy followed during the first four-and-a-half decades after independence. The trend was not substantially reversed even after liberalising reforms were introduced in 1991.