India's political economy challenge is to contain ‘transfer union’ discord
- Perceptions have grown in the Eurozone and India that transfers from richer states are funding profligacy in poorer ones. Measures need to be taken to assuage growing resentment.
Although all federal states have some mechanisms for the transfer of resources from richer to poorer constituents, if the perception grows that the richer states are subsidizing profligacy or incentivising populist policies in the poorer states, the union could be politically destabilized. Such perceptions are gaining currency both in the Eurozone and in India.