Economics at your fingertips  

Decentralization and Its Impact on Growth in India

Fernanda Andrade de Xavier, Aparna P. Lolayekar and Pranab Mukhopadhyay

Journal of South Asian Development, 2021, vol. 16, issue 1, 130-151

Abstract: We study the effect of revenue decentralization (RD) and expenditure decentralization (ED) on sub-national growth in India from 1981–1982 to 2015–2016 for 14 large (non-special-category) states. Our study provides evidence that both RD and ED play a defining role in India’s sub-national growth in this three-and-a-half-decade period. We use a panel data model with fixed effects (FE) and Driscoll and Kraay standard errors that control for heteroscedasticity, autocorrelation and cross-sectional dependence. To test for causality between growth and decentralization, we use the Granger non-causality test. The regression analysis is supplemented with the distribution dynamics approach. We find that: (a) While decentralization Granger-caused economic growth, the reverse causality effect of growth on decentralization was not significant; (b) Economic growth increased significantly after liberalization; (c) Decentralization, capital expenditure and social expenditure had significant positive impacts on economic growth; and (d) States that had high levels of decentralization also had high levels of per capita income, while states that had low decentralization also exhibited low per capita income.

Keywords: Decentralization in India; economic growth; sub-national government; distribution dynamics; Granger Causality (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1177/09731741211013210

Access Statistics for this article

More articles in Journal of South Asian Development
Bibliographic data for series maintained by SAGE Publications ().

Page updated 2021-10-26
Handle: RePEc:sae:soudev:v:16:y:2021:i:1:p:130-151