Equalization Transfers Based On Spending Needs and Fiscal Capacity of State Governments in India

K. R. Shanmugam () and K. Shanmugam ()
Additional contact information
K. R. Shanmugam: (Corresponding Author)Director and Professor, Madras School of Economics
K. Shanmugam: Chief Secretary of Government of Tamil Nadu and Senior Research Fellow of Madras School of Economics
Authors registered in the RePEc Author Service: Shanmugam K. Rangasamy

Working Papers from Madras School of Economics,Chennai,India

Abstract: This study addresses an important policy issue pertaining to determination of equalization transfers to Indian States. It empirically estimates the effect of transfers on expenditures of 29 Indian States using the panel data methodology. It also determines the transfers based on the spending needs and fiscal capacity of States. Results indicate a strong crowding-in effect of transfers on public spending of States and the presence of fly paper effect. The fiscal transfers positively relate to revenue expenditures in 13 out of 18 General Category States and 8 out of 11 Special Category States. Amounts of equalization transfers determined for all 29 States in four alternative scenarios range between ₹. 555 billion and ₹.16048 billion. We hope that these results will be useful to policymakers and other stakeholders to take appropriate strategies to design fiscal transfer policy such that all citizens can avail a standard level of public services in India.

Keywords: Fiscal Fiscal Transfers; Fiscal Equalization; Expenditure Needs; Fiscal Capacity; Indian States; Panel Data Methods (search for similar items in EconPapers)
JEL-codes: C23 H72 H73 H77 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2022-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mse.ac.in/wp-content/uploads/2023/02/Working-Paper-238.pdf (application/pdf)

Related works:
Journal Article: Equalisation Transfers Based on Spending Needs and Fiscal Capacity of State Governments in India (2022)
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: https://EconPapers.repec.org/RePEc:mad:wpaper:2022-238

Access Statistics for this paper

More papers in Working Papers from Madras School of Economics,Chennai,India Contact information at EDIRC.
Bibliographic data for series maintained by Geetha G ().