Thursday, November 27, 2014

Article 254 and Competitive Federalism

Here are a couple of very interesting articles on how federalism is being used as a competitive vehicle for economic reforms:

http://www.livemint.com/Opinion/dj1pn6ppxVCXYVzlJtNe5O/A-federal-path-to-reform.html

http://www.reuters.com/article/2014/11/26/us-india-rajasthan-insight-idUSKCN0J821T20141126

This is a very valuable strategy that would lay the groundwork for more sweeping and comprehensive reforms once Modi gets a majority in the Rajya Sabha. In the meantime, pending that fuller mandate, the competitive federalist route could be used to great effect, especially once the GST is used as a basis for ending tariff barriers between states. Once all states are forced to compete in a common Indian market, then competitive federalism will reward the reformist-minded, while penalizing the holdouts. It would create a "virtuous cycle" that would benefit the entire country.

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