October 01, 2016
Economic theory suggests that we should observe convergence in income per capita amongcountries or within regions in a large federal country. While there is considerable evidence ofconvergence among the advanced economies, and of convergence within subnational regionsof major economies such as the US, India is the one major economy bucking the trend, with atendency toward divergence in income per capita amongmajor states. This economic divergence of the different states raises the important politicaleconomy question of federalism and its discontents. At a minimum, we need to start having aserious conversation on whether a greater devolution of fiscal and legislative powers and notjust financial resources from the centre to the states ought to be the way forward.