This book is an analytical examination of financing and public service delivery challenges in a decentralized framework. It also provides critical insights into the effectiveness of public expenditure, through benefit incidence analysis of education and healthcare services in India. The benefits of decentralization always come with conflicts and trade-offs. By unpacking the process of decentralization, the authors identify that 'unfunded mandates', arising from the asymmetry between finances and functions at local levels, are a major challenge. The analysis is carried out by distilling the existing studies in this area, and through an empirical investigation of public finance data at different public sector levels in India, as well as in some selected developing countries. Using the household survey statistics of consumption expenditure, an analysis of utilization or benefit incidence of public spending on social sectors in India is achieved, covering education and health sectors. This title is available as Open Access on Cambridge Core.

Most discussions of India's substantive economic growth since the 1990s tend to focus on national level statistics or on particular sectors such as the financial and call service sectors or on the pharmaceutical industry. But with a population of 1.2 billion, India demands to be treated like a collection of individual "countries, " rather than a unified nation. Ten of its states have populations equaling or exceeding that of the United Kingdom. If the state of Uttar Pradesh were a country, it would be the fourth largest, behind China, India, and the United States. These facts pointedly tell us that if we are to understand the ongoing experiment in economic reforms and poverty alleviation, we must study India at the level of the state. In this spirit, State Level Reforms and Growth and Development in Indian States provides the first-ever comprehensive analysis of growth at the highly diverse state level. The authors argue that when the national government loosened its stronghold on industry and services, state governments were able to shape the fortunes of their citizens through state-level policy reforms. Because of this, every Indian state experienced accelerated growth, unlike China during the first two decades of its development when the eastern half flourished as the western half lagged. Every Indian state has grown faster in the last decade than any other decade in the post-independence era. In fact, some of the poorest states, notably Bihar and Orissa, have been growing the fastest. Professors Panagariya and Chakraborty and Dr. Rao refute the common assumptions that growth has not occurred or that poverty has not been reduced in all Indian states. The recent reforms have also led to improved access in every state to basic amenities such as permanent houses, electricity, water, and sanitation. These accomplishments notwithstanding, regional inequality on a per capita basis has grown as well. Reforms in state-controlled sectors such as agriculture, industry, healthcare, and education have not advanced as far as some analysts previously predicted. The authors outline the reforms in these areas and draw on the experience of states that have successfully carried out some of them. The authors pay special attention to reforms in the areas of education and health while recognizing that the Indian constitution vests in the states much of this legislative and other authority and while considering the real absolute rise in income, literacy, and health status across all the states.