Impact of Fiscal Transfers Policy on Regional Growth Convergence in India

K. R. Shanmugam () and K. Shanmugam ()
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K. R. Shanmugam: (Corresponding Author)Director and Professor, Madras School of Economics
K. Shanmugam: Chief Secretary of Government of Tamil Nadu and Senior Research Fellow of Madras School of Economics
Authors registered in the RePEc Author Service: Shanmugam K. Rangasamy

Working Papers from Madras School of Economics,Chennai,India

Abstract: This study is an attempt to empirically analyze the effect of fiscal transfers on growth and regional growth convergence during 2005-2019, using the standard growth convergence model for panel data. Results indicate the growth convergence across Indian States. The regional income gaps reduced at a rate of 17.7-31.9 percent per annum. The fiscal transfers contribute to the growth of 22 out of 29 States and also contribute significantly to the convergence. Moreover, there is strong evidence for convergence across General Category States and across Special Category States, indicating club convergence. The average income growth is higher in Special Category States and higher in post global crisis period. It is our hope that these results will be useful to policymakers and other stakeholders to take appropriate strategies to design fiscal transfer policy such that it will speed up the convergence process.

Keywords: Growth Convergence; Fiscal Transfers; Indian States; Panel Data Methods (search for similar items in EconPapers)
JEL-codes: C23 E22 E62 R11 R12 R23 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2022-12
New Economics Papers: this item is included in nep-ure
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Related works:
Journal Article: Impact of fiscal transfers policy on regional growth convergence in India (2024)
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