THE EROSION OF REGIONAL AUTONOMY: HOW STRUCTURAL ADJUSTMENT PROGRAMS INFLUENCE CENTRE-STATE RELATIONS IN INDIA

Abstract

This paper explores the influence of Structural Adjustment Programs (SAPs) on the dynamics of centre-state relations in India, emphasizing the decline in regional autonomy. Implemented in the 1990s with guidance from global financial institutions such as the IMF and the World Bank, SAPs signaled a major shift in India's economic framework. Key neoliberal policies, including privatization, deregulation, and fiscal austerity, were aimed at stabilizing the economy but resulted in the consolidation of fiscal control at the central level. This shift diminished the financial independence of state governments, compelling them to align with national policies, often to the detriment of local priorities. While SAPs facilitated India’s economic liberalization, they also heightened the states’ fiscal dependence on the centre, reducing their autonomy in key sectors such as health, education, and infrastructure. The paper places India's experience within a broader global context, comparing it to SAP-induced reforms in countries like Nigeria and Mexico. Additionally, it reflects on how the Goods and Services Tax (GST) continues the centralizing trend initiated by SAPs, further straining centre-state relations within India's federal system.