| Abstract | Fiscal performance and intergovernmental financial relations (IFR) form the backbone of multi-level governance
systems, particularly in federal structures like India, where resource allocation between central, state, and local
governments shapes economic stability and public service delivery. Effective IFR addresses vertical
imbalances—where subnational spending needs exceed revenue capacities—and horizontal disparities across
regions, through mechanisms like tax assignments, grants, and revenue sharing. Amid global economic
pressures, including post-pandemic recovery and fiscal federalism reforms, analyzing these dynamics reveals
their impact on fiscal discipline, growth, and equity. Intergovernmental fiscal relations encompass revenue
mobilization, expenditure assignments, and transfers to ensure efficient public finance. Fiscal performance
metrics—such as deficit-to-GDP ratios, debt sustainability, and own-revenue buoyancy—hinge on these
relations, as over-reliance on central transfers can erode sub national accountability. Principles like subsidiary
(assigning functions to the lowest capable level), fiscal autonomy, and equalization guide optimal designs,
fostering macroeconomic stability while enabling regional development.
Keywords: Fiscal Policy, Financial Performance, Intergovernmental Relation.
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