When Does Decentralization Deliver? 'The Dilemma of Design'

The paper looks into various questions associated with the dilemma of designing decentralization instruments for the success of fiscal decentralization These include the question of designing the right mix of policies, the questions of sequencing and synchronization, the question of pace and that of balancing the contrasting forces of centralization and decentralization. The paper offers the insight to the policymakers that while designing fiscal decentralization they should not try to replicate any 'ideal type' solution. Though the ideal types can be powerful analytical tools, yet they do not lead to solutions for specific situations Real world fiscal arrangements rarely follow the idealized model; they are loaded with historical developments and political ad hoc solutions. It is simply not realistic to start from tabula rasa. The paper emphasizes that there is no "one size fits all" type answer to decentralization question. All systems will have to work out their own style of going about decentralization and restructuring of intergovernmental relations depending on the context and conditions peculiar to their own situation. The paper also argues that any attempt towards fiscal decentralization must be firmly grounded in the basic principles of fiscal federalism, irrespective of the fact whether the country in question is an officially declared federal state or not. Thus while implementing decentralization policies, the need is to 'bring the federal back in'