Central Transfers to Offset Fiscal Disadvantages of the States: Measurement of Cost Disabilities and Expenditure Needs

Govinda Rao and Vandana Aggarwal
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Vandana Aggarwal: Department of Industrial Development, Government of India

Indian Economic Review, 1991, vol. 26, issue 1, 13-34

Abstract: Intergovernmental transfers are made either to offset fiscal disadvantages of the States or to upgrade specified public services to normative standards in the deficient States. Yet, the transfers designed in the Indian context fail to satisfactorily take account of these objectives. An attempt is made to provide a design of intergovernmental transfer schemes to meet the above objectives. An important prerequisite for operationalising such transfer schemes is to estimate unit costs of public services and expenditure needs in the States. The paper provides a methodology to estimate these fiscal parameters based on the cost functions of five important pubic services.

JEL-codes: H77 (search for similar items in EconPapers)
Date: 1991
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