Interplay of Prioritisation of Public Expenditure on Health and Education and Absorption Capacity of the Indian States

Deyona Rose Saji () and S. Madheswaran
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Deyona Rose Saji: Centre for Economic Studies and Policy, Institute for Social and Economic Change
S. Madheswaran: Centre for Economic Studies and Policy, Institute for Social and Economic Change

A chapter in India's Public Finance and Policy Challenges in the 2020s, 2025, pp 121-139 from Springer

Abstract: Abstract This study aims to answer the two major policy questions: what determines the prioritisation of a sector in government expenditures? and how are the changes in macro-fiscal variables affecting the changes in public spending towards health and education? It examines the role of major fiscal factors and the state’s capacity in prioritising the health and education sectors of sub-national governments in India, using the Panel ARDL-PMG model. The results indicate that the state’s capacity is crucial in determining the spending towards health and education. The positive and significant long-run relationship between the government health/education expenditure and HDI, suggests the need to create human capacities in the states to better absorb the expenditures by the government. The effects of short-run lagged values of fiscal deficits, own tax revenues, and grants received from the centre indicate the need to create fiscal space among the states.

Keywords: Government expenditure; Health and education; State’s capacity (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-96-2860-5_8

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DOI: 10.1007/978-981-96-2860-5_8

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