Determining fiscal equalization transfers for elementary education to Indian States

Jyotsna Rosario and K.R. Shanmugam

Journal of the Asia Pacific Economy, 2024, vol. 29, issue 1, 90-111

Abstract: This study attempts to determine the fiscal equalization transfers for elementary education using data for 27 Indian States from 2011–12 to 2017–18 and panel data methodology, based on a model adapted from Australia’s expenditure equalization mechanism. It is found that States with larger fiscal capacity tend to spend more on elementary education and the existing transfers mechanism has failed to compensate the lagging States. Using the estimated values from the expenditure model and two benchmarks: all States’ average and top three States’ average, per student expenditure on elementary education, the State specific finance gap and total transfers need are computed. The results reveal that Bihar, West Bengal, Uttar Pradesh, Jharkhand, Madhya Pradesh and Maharashtra have a relatively large expenditure gap. Given the magnitude of the Centre's budget, the estimated additional transfers seem to be feasible. The findings of the study will be useful for policymakers and other stakeholders to create appropriate fiscal transfers strategies that can enable all Indian States to provide a standard level of elementary education.

Date: 2024
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DOI: 10.1080/13547860.2021.2012981

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