Fiscal Decentralization and Economic Growth: A Comparative Study of China and India‪.‬

Although there are obvious differences in the political systems of China and India, there are surprising similarities in their respective approaches to decentralization. Both countries face similar design issues with their intergovernmental systems, such as the lack of clear expenditure assignments, high transfer dependency, low revenue autonomy, and soft budget constraints. As a result, there is a lack of aggregate fiscal discipline among sub-national governments, and the quality of sub-national government service delivery is poor in both countries. Poor service delivery and the lack of fiscal discipline threaten the ability of both countries to sustain high rates of economic growth. "Decentralization has been regarded as the major institutional framework for the phenomenal industrial growth in the last two decades in China (taking place largely in the non-state non-private sector); and India ushered in a fundamental constitutional reform in favor of decentralization around the same time it launched a major program of economic reform."