ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Case of Industrial Licences and Letters of Intent

Political Lobbying and Fiscal Federalism

In a quasi-federal democracy like India, political representatives often fight to attract central disbursements towards their own states. Among central disbursements, two most important ones are letters of intent and industrial licences. Much of the disparities in the economic growth of various states is attributable to variations in the development of industries and the latter, in turn, are largely contingent on the nature of the industrial policies that were followed. In this paper the authors argue that the industrial policies pursued in the post-independence era resulted in a distorted pattern of disbursement of letters of intent and industrial licences. This remains true even after account is taken of the 'demand'-generated aspect of the disbursements. It is also shown how the presence of the same distortion in the disbursements in the so-called backward regions vitiates the very objective of balanced regional development.



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