Fiscal Consolidation in the Indian States: A Status Assessment

Manaswini Panda () and Chittaranjan Nayak ()
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Manaswini Panda: Ravenshaw University
Chittaranjan Nayak: North Eastern Hill University

Journal of Quantitative Economics, 2025, vol. 23, issue 4, No 5, 1116 pages

Abstract: Abstract The present study assesses the fiscal consolidation processes adopted by the Indian subnational governments and their overall economic performance. The study has used annual data on state finances for the period 2001–2020 published by the RBI. To evaluate the fiscal performances of the subnational governments, we applied the Principal Component Analysis (PCA) to construct the fiscal performance index. Then Malmquist output-oriented Data Envelopment Analysis (DEA) approach is used to determine the fiscal efficiency of the states. A comparative analysis is undertaken in terms of budgetary strategies and their implications. The findings of the study illustrate that states like Rajasthan, Karnataka, Tamil Nadu, Haryana, Punjab, Uttar Pradesh, Assam, Himachal Pradesh, Tripura, and Uttarakhand show a progressive move in their fiscal performances through the fiscal consolidation process, whereas Bihar, Uttar Pradesh, West Bengal, Maharashtra, Arunachal Pradesh, Nagaland, Meghalaya, and Mizoram are the least-performing states. From a policy perspective, this study highlights that the qualitative expenditure management process and the tax augmentation measures are critical to attaining a sustainable fiscal stance.

Keywords: Fiscal consolidation; Qualitative expenditure; Fiscal performance; Principal component analysis; Data envelopment analysis; H11; H12; H30 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s40953-025-00462-w

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