India: Levels & Levers for
Economic Impact
Richard Rossow
Senior Adviser & Chair of U.S.-India Policy Studies

India: Center-State Dynamics
Indian Constitution divides governance powers into 3 schedules
• The Union List: National security, nuclear power, foreign affairs, citizenship,
railways, communications, airlines, banking, more.
• The States List: Police, health, agriculture, water, land, gambling, more.
• The Concurrent List: Regulation of factories, labor, electric power, forest
and wildlife management, more.
Modi Government: Early Moves to Devolve Power to States
• Transform Planning Commission into NITI Aayog.
• Allow states to negotiate ODA loans directly.
• 31% jump in Centre revenue given to states.
Also- Empower & Challenge States to do Better
• Drafting model laws for states’ consideration.
• Rank states across multiple domains- including business environment-
“Business Reforms Action Programme”
• National missions to expand access to digital tools, electric power, LPG
cooking cylinders, water.

State Governments & Growth Policies
States’ Challenges
• Capacity constraints.
• Lack of transparency.
• Uneven levels of “professionalism” when attempting to lure business.
• Low re-election rates (though- over 50% for last 10 years).
• Often- dramatic policy shifts when state governments change.
• Short tenure for key bureaucrats.
• Little devolution of authority to cities.
• Voter Interests!!!!

A Big Need: Municipal Governments
Local
• The 74th amendment to India’s Constitution suggests 18 functions that
local bodies could manage. These include water supply, slum
improvement, roads, and bridges, public health, and sanitation.
• NITI Aayog: India’s cities occupy 3% of the area/ 60% to the country’s GDP.
• Oxford Analytica: noted the 20 cities expected to grow the most by 2035, 17
are in India.
• RBI Report on Muni Finance in 2022, only 9 municipalities have recently
issued bonds.
• Per RBI, “Indian cities are emaciated financially and are far from being able to
generate the resources required for providing good quality infrastructure and
services to their citizens.”

State Governments & Growth Policies
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India- Rural vs Urban Population
Rural Urban
When Things Get
Really Interesting!