The Extent and Effectiveness of Decentralisation

Critically discuss the extent and effectiveness of decentralisation in terms of its effects on service delivery and accountability.

Use examples from at least three countries


During the cold war, developed and developing countries have been got succeeded in discovering the new term that was decentralization. Implementation of the decentralization in their countries has been helped them in achieving a higher growth rate of GDP.  This discussion has been divided into three parts. Many of the authors have been discussed about its implementation but few of them have thrown light on its effectiveness. Governments of different countries have been accepted that decentralization is not a simple process because thoughtful management, integrity, competency, skill and accountability are the basis of decentralization. The main motive behind implementing the decentralization is to improve the service delivery that is being delivered by the public sector of the country. These three parts have been discussing the effectiveness of the decentralization in three different countries in terms of service delivery and accountability. These three different countries are India, Hungry, and Indonesia.  Different countries have been crafted their model for the implementation of decentralization as per the need of their economies. This transformation procedure has been played a paramount role in establishing democracy and building civil society in such countries. Results of the recent surveys have been showing that 63 out of 75 developing countries have made their decision to decentralize the authority to local bodies.

This document will give an idea about how decentralization has improved the delivery of the services. This document will help in learning how decentralization has been alleviated the issues of these governments of three countries which were being caused due to the central government.

Effectiveness of Decentralization in India

It is not a simple task to evaluate the effect of decentralization over the Indian economy. This is because decentralization also has some consequences which may be unintentional one. India has been adopted micro-level institutional arrangement in its economy to fight back the problem of malnutrition, unemployment, gender inequality etc (Aiyar and Kapur ., 2019). Great leaders of India has been realised in the starting only that democracy cannot get its real meaning without the effective implementation of decentralization. In India decentralization has been implemented with a single motive to enhance the quality of life of Indian citizens. However, it has been noticed that India has been a country where the constitution has given more power to the central government as compared to the state. But still, it has been improved the situation in India by addressing the local needs of the public (Sujarwoto, 2017). Accelerated rural development and improved agricultural productivity and effective use of resources are the few examples of the positive outcome of decentralization in the Indian economy.   Decentralization in India has been played a paramount role in reducing inequality and poverty in the Indian economy (Kumar and Singh ., 2017). A lot of amendments has been made in the original to make various reforms in the system like the establishment of Panchyati Raj Institution. Indian constitution of India has been defined Panchyati Raj Institution as a institute of self government. By this Indian constitution has been cleared that administrative, political and financial authority must be decentralized to local government of India so that they can address the needs of local people. In this way decentralization in India has been given an opportunity to local people to contribute their efforts at the grass root level in the democratic process. Decentralization and Democracy in India has been improved the economic development in India. Government of India has been putting its honest efforts to alleviate poverty through decentralization of authority beyond the state level. Today local governments of the states are much stronger in terms of its service delivery and accountability. Quality of the service delivery and accountability of these local bodies toward the local people can be judged by two things only. One is the achievements of their targets and the amount of the fund that is being utilized by them. Data given in the below table has been showing that the grant has been increased from the time of independence (Baskaran et al., 2016).

Even after so many positive outcomes of decentralization, its effective implementation has been becoming a challenge for the Indian government. The Indian government has been completed the design aspect of rural decentralization at the centre as well as at state. However, the government has been lagging in its implementation. However political decentralization is in progress as compared to administrative and fiscal decentralisation in India (Martinez et al., 2017)). For example, all the constitutional provisions have been completely fulfilled by every state of India. Elections are being carried out with full participation of the local public. Accountability has been becoming an obstacle in the effective implementation of the decentralization due to improper functioning of Panchyati Raj. These local bodies have been holding neither the sufficient funds nor the power to influence the development projects of the go. As per the data, it has been noticed that decisions made by panchayats were not even relevant to their lives. Cast and gender inequality problems of the Indian society have also been pervaded the working of the Panchayat Raj Institution. This proves that the ineffective implementation of the decentralization in India has been affecting the service delivery of the local bodies (Bethlendi and Lentner., 2018).

In fiscal decentralization, state finance commission of the state has a function to recommend the resource and creation for the local bodies. Every time the commission got failed in accessing the resource requirements of local bodies because there is no clear transfer of functions. Decentralization of the authority is not just devolution of power but devolution of funds and authority is also required. Similarly to make Panchayat Raj Institutions work appropriately, the state has to devolve powers along with funds as well as functionaries so that local governing bodies can handle the projects effectively. But on ground reality process is lagging. The issue ineffectiveness of the decentralization is that the Indian government has been given influence over the political decentralization which is the precursor of other two that is fiscal and administrative decentralization.

Above given table has been showing the data for the implementation of decentralization at an international level. As per the data, India has been setting an example for world for political decentralization but comes far down in the list in the case of fiscal and administrative decentralization. This imbalance between the three dimensions of decentralization that is fiscal, political and administrative decentralization has been undermined its effect on the service delivery and accountability of the Indian government (Slavinskaitė., 2017).

Effect of Decentralization over Hungary

Hungary was the first country which set an example for other developing countries by deciding to form local self-governments in the country. Government has made its best efforts to meet its fiscal targets but still, there are indications of system imbalance in the intergovernmental finance structure. Expenditure made on the projects and revenue generated is not getting matched with each other. Example of Hungary has been throwing light on the fact that just decentralizing the administrative powers and increasing the number of government tier does not result into greater accountability These internal inefficiencies of the internal government of the country has been got surfaced at the time of international economic crisis. With the passing time, the Hungarian government passed new reforms in order to overcome the inefficiencies of the internal government (Qiao et al., 2019). This was being targeted by modernizing the task, process, personnel and structure. However, initially, decentralization in Hungary has been created an imbalance in the economy of Hungary. Economic crisis, high GDP drop, high inflation, decreased personal income are the few issues which created an obstacle in the implementation of decentralization in Hungary. But in later years economy has been started growing which improved the employment, wages and pensions of the local public of Hungary. This has been changed the living standard of the local public. As per the data collected, living conditions of the one-third of the population get improved (Canavire et Al, 2019).

The flaw in the administration has been posed another obstacle in ensuring the accountability and delivery of quality service. The Hungarian government has been implemented administratively decentralization but with a low level of municipal fiscal freedom. The local government of Hungarian has been given the right to collect revenues like taxes and fees but size, tasks, financial resources of the Hungarian municipalities were not sufficient. It has been becoming very tough for almost all municipalities to handle these disparities, fulfilling local tasks and carrying out investments (Lamba et al.,2019). Another drawback of the system was that the facility of market loan has been available with the municipalities but good decisions could not be taken by the lender. Decentralization has been got failed in ensuring its accountability in almost countries due to this murkiness in the expenditure. This problem of murkiness in the expenditure responsibility has been aggregated the issue when any newly formed country has tried for fiscal decentralization. Presently the financial burden of local and county government has been got ease in Hungary with the creation of a new micro region level at different levels to handle the balance task allocation and tax levying rights in Hungary (Lentner et al., 2019). This has been increased the competency of the government for delivering quality service in Hungary. The reason behind this that when the same activities are being carried out for such a big crowd then per capita cost get reduced. With the passing time Hungarian government has been learnt from its experience that with broaden municipal rights, the local government has been could manage local service such as sewage treatment, health care or employment services inappropriate way. In this way, municipalities could make efforts in reducing their problem of under-financed and would make it more independent to take their decisions for the development of projects in Hungarian. Moreover, this has been put a halt on the increasing graph of indebtedness of the municipalities. Consequently a new improved and transparent system has been fostering in the system with increased local government responsibilities. The decision of this new system with internal transparency and close control is being readily accepted by the central government rather than considering the patchwork of local government. Re-centralization of municipalities has been given the right to the central government to have a check on the financial decision of municipalities. In the present scenario, it cannot be depicted by how long the newly improving system will start working effectively. From the above discussion, it can be concluded that now it seems like efforts are being made in the right direction at least for the short time. Reason for this consideration is that the present government of Hungarian has been working on eliminating the local fiscal uncertainties (Lentneret al., 2019).

Effect of Decentralization over Indonesia

Before discussing the effectiveness of decentralization in Indonesia, One needs to understand that the reason which triggered decentralization in Indonesia. There were many reasons which may be responsible for the abrupt onset of decentralisation in Indonesia. Some even blamed for country’s financial problems.  The process of decentralization has been started in Indonesia after the collapse of the Soeharto regime in May 1998. Soeharto regime has been completely wiped out from Indonesia as it was getting failed in handling the administrative problem of states of Indonesia. After this wipeout, Indonesia has been abruptly adopted the process of political and fiscal decentralization in its economy. This sudden change in the system has been given the political and economic powers to the third level of government of Indonesia. Collected data has been proved that abrupt adoption of the decentralization process in Indonesia has not created political and economic hurdles in the country. Unlike other countries, Indonesia has not followed a logical order for decentralization. There were two logic behind this decision. One was that subnational government of the country has not been capable to carry out economic planning and incapable of taking initiatives to promote local economic growth. The second was that competent and trained mangers were limited which has been required in order to implement the new law and order in the country. The sub-national government has not been either spending on public services and nor has made the capital investment. Rapid adoption of decentralization process has been given limited time to Indonesia to assess the potential impact of decentralization over the country. This has been created a foremost risk to macroeconomic stability. Because local services like health, education, culture, land management and capital investment etc. has been devolved to the three-tier government of the Indonesia (Nursini, 2019). As a result, no powers or minor powers have been left with provinces. In Indonesia, local leaders were being elected through direct election. This has been given decision making authority to local officials to take decisions regarding citizens and business. Consequently corruption has been got gip over the Indonesia.  Even after the success stories of local democracy in Indonesia, there have been many cases of bribery and gratification which stained the local democracy in the country. This is because decision making authority have been started directly asking for bribes for taking decisions in their favour. Competencies of these local officials were also doubtful. Result of the studies has been showing that the problem of corruption has been caught in many regions and that is why successful implementation of decentralization policy has not been yet achieved. Indonesia’s ministry records have the data that in the last two decades 342 reagent/ mayor and 18 governors have been interrogated for corruption charges. Local government at Indonesia has been holding the power to nullify the decision that has been taken by the central government. Absence of unified public service standards and the government's lack of knowledge about the new management of public funds has resulted into corruption and various delays in disbursement of the financial budget which further affected the service delivery of the government. Due to the immense power of the sub-national government of Indonesia, the central government has been substantially coming under the control of the local government. In other terms, it can be said that decentralization programme at Indonesia has been mainly focussed on decentralizing the responsibility to the subnational government of the country without paying attention towards the issue of its accountability. Another flaw in the system was that the centre has to support the local government unconditionally in terms of finance due to lack of tax decentralization. It has been promoting corruption on the account of transferring funds from the government to local. This has been further weakened the bottom-up accountability. After so many years of reforms, there is still no demarcation of responsibilities for the local government as well as for the central one. Various reforms have been made by the government of Indonesia to strike the balance between subnational and central government. Local laws, regulations, and taxes have been introduced as per the requirements of decentralization process. All over it can be said that from the last 18 years, big and bold steps are being taken by the government of Indonesia to effectively implement the decentralization in the country. As it has been discussed earlier also that decentralization has been a comprehensive task. That is why after successful implementation of two dimensions of decentralization, targets for the same seems to be tough to be achieved (Kurniawan ., 2019).


In this document, the effectiveness of decentralization has been discussed in three different countries which have been holding three different economies. Three different economies mean India has been a world’s largest democracy on the contrary Hungary has been a small country. And on similar front Indonesia has been a country From the above discussion it can be concluded that decentralization has been a considerable an en effective strategy for every country if implemented effectively.  Here it has been found that decentralization for India has been still a challenge for the government as it has not been decentralized its fiscal power to local government. Similarly, the Hungarian government has been adopted administrative decentralization whereas unlike other countries again failed to devolve the fiscal powers to local government. Unlike others, Indonesia's government has been devolved its political and fiscal responsibility to the local government.  These three economies have been an example for the people who prove that effective decentralization can only be implemented if one is able to strike a right chord between the decentralization and in its dimensions.


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Sujarwoto, S., 2017. Why decentralization works and does not works? A systematic literature review. Journal of Public Administration Studies2(1), pp.1-10.

Kumar, J. and Singh, R., 2017. Fiscal Decentralization and Urban Local Finance in India: A Case Study of Haryana. Arthshastra Indian Journal of Economics & Research6(6), pp.38-50.

Baskaran, T., Feld, L.P. and Schnellenbach, J., 2016. Fiscal Federalism, Decentralization, and Economic Growth: A Meta‐Analysis. Economic Inquiry54(3), pp.1445-1463.

Martinez‐Vazquez, J., Lago‐Peñas, S. and Sacchi, A., 2017. The impact of fiscal decentralization: A survey. Journal of Economic Surveys31(4), pp.1095-1129.

Bethlendi, A. and Lentner, C., 2018. Subnational Fiscal Consolidation: The Hungarian Path from Crisis to Fiscal Sustainability in Light of International Experiences. Sustainability10(9), p.2978.

Slavinskaitė, N., 2017. Fiscal decentralization and economic growth in selected European countries. Journal of Business Economics and Management18(4), pp.745-757.

Qiao, M., Ding, S. and Liu, Y., 2019. Fiscal decentralization and government size: The role of democracy. European Journal of Political Economy.

Canaveral-Bacarreza, G., Martinez-Vazquez, J. and Yedgenov, B., 2020. Identifying and disentangling the impact of fiscal decentralization on economic growth. World Development127, p.104742.

Kyriacou, A.P. and Roca-Sagalés, O., 2019. Local Decentralization and the Quality of Public Services in Europe. Social Indicators Research, pp.1-22.

Lentner, C., Nagy, L., Vasa, L. and Hegedűs, S., 2019. Sustainability and Control Issues of the Financial Management of Local Governments–Through Hungary’s Example. Visegrad Journal on Bioeconomy and Sustainable Development8(1), pp.18-26.

Talitha, T., Firman, T. and Hudalah, D., 2019. Welcoming two decades of decentralization in Indonesia: a regional development perspective. Territory, Politics, Governance, pp.1-19.

Nursini, N., 2019. Poverty Alleviation in the Context of Fiscal Decentralization in Indonesia. Economics & Sociology12(1), pp.270-368.

Kurniawan, D., 2019. The Impact of Fiscal Decentralization on Regional Economic Growth and Regional Income Disparity in Indonesia (Case Study: West Sumatra Province during the period 2011-2017) (No. 201905). Department of Economics, Padjadjaran University.


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