Internal Trade Barriers in India : Fiscal Check-Posts

A subset of the costs (and benefits) of sub-national fiscal autonomy in federations is examined, with the major focus being road check-posts. The examination is done with reference to Indian states and using elementary, partial equilibrium, diagrammatic analysis. Empirical analyses of the revenue impact of abolition of "fiscal frontiers" in the European Union in 1993, and the revenue performance of the state of Maharashtra in India, which has no check-posts, relative to other Indian states, suggests the preliminary conclusion that road check-posts have positive revenue benefits that cannot be made good by other, information based, enforcement mechanisms. Possible ways of mitigating road check-post costs are reviewed and some issues relating to fiscal barriers requiring further analysis are identified