The paper attempts to analyse the impact of devolution of taxes
and distribution grants by the Centre to the States in India by taking
fourteen major States for the time period 1980-81 to 2006-07. The study
focuses on the impact of inter- State distribution of Central grants and
taxes. Analysis reveals that formula based tax devolution has been more
equalising than grants. Study finds that there is need to explore
alternative mechanisms.
Keywords: Tax Devolution, Grant Distribution, Horizontal and
Vertical Imbalance
JEL Classification: JE
