Federal Transfers and the Tax efforts of the States in India

K. Jothi Sivagnanam () and Naganathan M.

MPRA Paper from University Library of Munich, Germany

Abstract: The paper has examined the the impact of federal fiscal transfers on the budget of the state (sub-central) governments in India. The relationship between the federal fiscal transfers and the tax efforts of the 14 major Indian states have been anlysed for fifteen years (from 1970-71 to 1984-85)through a panel dadat set. Fixed efeect model and its variants have been employed. The study found that the federal transfers have dampaned the tax efforts of states in India. Hence, a hiher weightaege for the 'tax effort criterion' has been suggested in the vertical devolution formula of the Indian Finance Commission to ensure efficiency.

Keywords: Federal Transfers; Tax Efforts; Fiscal Federalism in India; Efficiency; Vertical fiscal balance (search for similar items in EconPapers)
JEL-codes: H7 H72 H77 (search for similar items in EconPapers)
Date: 1999-12
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Citations: View citations in EconPapers (3)

Published in Indian Economic Journal part 4.volume(2000): pp. 101-110

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