Republic of India

AbstractThe chapter deals with the salient features of India’s federal fiscal architecture which is regarded, by many, as unitary in nature. Like other federations, India’s multi-level fiscal system is characterized by two kinds of imbalances, i.e. vertical (due to mismatch in expenditure responsibilities and taxation powers to union, state and local governments) and horizontal (due to high degree of disparities among sub-national governments in their fiscal capacities and fiscal needs). The chapter narrates the structure, process and interplay of institutions including successive union and state finance commissions and their treatments to correct various fiscal asymmetries. It also summarizes the recent reforms in intergovernmental fiscal relations including the system of fiscal transfers, equity and efficiency concerns, role of political institutions and public debts to understand India’s federal finance.