Programme 1: Financing the State. Accountability and Capacity in Developing Country Federalism: Empowered States, Competitive Federalism.
State extraction depends in part on the degree and type of accountability to citizens. Accountability relationships are especially complex in federal systems, where multiple and overlapping jurisdictions must compete to respond to, and extract from, common citizen bases. The current project examines the operation of accountability and taxation in India. India has always been a centralised federation in which a powerful central government, made even more powerful by single-party dominance, overwhelmed most state interests. The result was a fiscal system in which the central government controlled most resources. Over the last few decades, the Indian party system has increasingly fragmented and oriented towards interests in the states, and the fiscal system has shifted in turn. What was originally a highly centralised federation has now evolved into a more decentralised regime in which resources and powers are held significantly by state governments, which compete with each other and with the federal government. Interestingly, as competition increased, the overall amount of tax decreased and, in turn, more coercive mechanisms of extraction were adopted.
Forum for Development Studies, No. 1, Vol. 31, 26 pp.