Decentralization and development the Indian balancing act

Abstract

Over the course of India's six decades of statehood, the central government granted and removed authority to and from states resulting in a variety of development patterns among Indian states and across different periods of India's history. The cases presented here illustrate that when sub-national groups with well-entrenched and capable governing institutions successfully lobbied the center for more authority, several developmental outcomes-reducing insurgent violence, promoting economic growth, and reducing poverty-of the groups strengthened. When the central government failed to relinquish power and responsibility to such states, development slowed or stalled. Conversely, development did not significantly improve in states with weak governing institutions even when they requested and were granted more power from the center illustrating the importance of embedded and strong state institutions in state development. This thesis examines the effect of decentralization on three aspects of development and describes the conditions under which decentralization and centralization promote or impede insurgency, economic growth, and poverty reduction. Based on empirical data from Indian states and detailed analysis of India's shifting political economy over time, it is shown that the decentralization of fiscal and political authority to capable sub-national governments enhances development programs. Conversely, centralizing authority in the presence of a capable subnational government, or ceding authority to incapable sub-national governments impedes development.