Intergovernmental Transfers Rationale and Design

M. Govinda Rao and Nirvikar Singh

in The Political Economy of Federalism in India

Published in print November 2006 | ISBN: 9780195686937
Published online October 2012 | e-ISBN: 9780199080571 | DOI:

Series: Oxford India Paperbacks

Intergovernmental Transfers Rationale and Design

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This chapter examines the economic rationale for intergovernmental transfers and analyses their appropriate design to fulfil the stated economic objectives. The main economic arguments for intergovernmental transfers have been made in terms of offsetting fiscal imbalances or closing fiscal gaps, establishing horizontal equity across the federation, and offsetting inter-jurisdictional cost and benefit spillovers or for merit good reasons. This describes various forms of intergovernmental transfers in India and discusses the ideal mix of general-purpose and specific-purpose transfers and the appropriate designs of these transfers.

Keywords: intergovernmental transfers; fiscal gap; fiscal equity; competitive equality; fiscal imbalances; horizontal equity; inter-jurisdictional cost; India

Chapter.  7629 words. 

Subjects: Economic Development and Growth

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