Fiscal Decentralization and Economic Growth Role of Democratic Institutions

Publication Year : 2020

This paper attempts to analyze the impact of fiscal decentralization (FD) on economic growth. FD involves shifting some responsibilities for expenditures and/or revenues to lower levels of government. It is an effective strategy to promote economic growth by increasing the efficiency of the public sector. Ÿ This procedure reinforces the government’s responsibility to the residents by including them in checking government execution and requesting remedial measures. This procedure moreover makes governments responsive and responsible, prompting lower defilement and improved conveyance of open administrations. The certain presumption behind the positive commitment of FD is the presence of an overall characterized institutional system. This expands the responsibility and straightforwardness in the political framework and henceforth bringing down corruption. That, at last, prompts a significant portion of open assets and, consequently, financial development. Ÿ Since autonomy, the Niemeyer Award 1947, the Raisman Award 1952, the One-Unit Formula 1961 and 1965, and seven NFC grants dependent on the 1973 Constitutions for income sharing have been reported. As of late, the administration of Pakistan has attempted two significant improvements by marking the National Finance Commission (NFC) grant and bypassing the eighteenth Constitutional Amendment. These improvements would cause a major move in the division of forces between the inside and the provinces. The need for FD in Pakistan arose due to the mismatch between expenditure requirements and the revenue generation capacity. This mismatch necessitates the inter-governmental transfer among the federation and provinces, which is a vital part of the decentralization process.

PIDE Working Papers 2013: 89