What do we know about fiscal sustainability across Indian states?

Vaseem Akram and Badri Rath

Economic Modelling, 2020, vol. 87, issue C, 307-321

Abstract: This study examines fiscal sustainability using Indian state-level data from 1980-81 to 2017-18. The results, derived from cointegration and dynamic ordinary least squares techniques, show strong fiscal sustainability for the majority of states. Our results also confirm that northern, western, and southern states are more fiscally sustainable as compared to eastern states. Further, we find fiscal sustainability for both revenue and capital accounts. Moreover, political alignment does not affect fiscal sustainability, except in a few states. From a policy perspective, state governments need to revisit their expenditure patterns to minimize non-developmental expenditure, particularly for those states with weak sustainability.

Keywords: Fiscal sustainability; Intertemporal budget constraint; Cointegration; Indian states (search for similar items in EconPapers)
JEL-codes: C33 H30 H72 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:87:y:2020:i:c:p:307-321

DOI: 10.1016/j.econmod.2019.08.005

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