Appraising the redistributive properties of the Indian fiscal equalization transfers

Equalization transfers from central to sub-national level are a very common policy instrument around the world, espacially used in federal countries. The main motivation of such scheme is, typically, to equalize citizens’ access to public services across jurisdictions by correcting the unequal distribution of fiscal capacity across states. For instance, the Indian Constitution recongnizes that the assignment of tax powers and expenditure functions would create imbalances between expenditure ‘needs’ and abilities to raise revenue and, thus, the need of equalization payments.

The purpose of this research project is to develop a methodology for appraising the equalization transfers and to appraise the specific Indian equalization scheme. As India is well-structured federation and a developing country, it seems to be a very interesting study-case. Indeed, economic literature have shown the crucial importance of public goods such education or health in the growth and economic development. The allocation of them amongst Indian citizens and states could be an important issue for an well-balanced and fair economic development. Thus, that highlights the importance of a better understanding of the redistributive properties of equalization transfers.