Impact of Transfers on Elementary Education Expenditure and Measuring Equalization Transfers to Indian States

Jyotsna Rosario () and K.R. Shanmugam
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Jyotsna Rosario: UGC Senior Research Fellow at Madras School of Economics, Gandhi Mandapam Road, Kotturpuram, Chennai - 600025, India

Working Papers from Madras School of Economics,Chennai,India

Abstract: This study examines the impact of Central transfers on elementary education expenditure and determines fiscal equalization transfers using the data for 28 Indian States from 2009-10 to 2020-21, the Australia’s expenditure equalization framework and the static panel data methodology. Based on the estimated values from the expenditure model and two benchmarks: all States’ average and top three States’ average per student expenditure on elementary education, it computes the State specific finance gap and total transfers needs. Results indicate 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. Bihar, West Bengal, Uttar Pradesh, and Madhya Pradesh have a 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 researchers to create appropriate strategies and design equalization transfers that can enable all Indian Sates to provide a standard level of elementary education.

Keywords: Fiscal equalization; Australian transfer mechanism; elementary education; public education expenditure; Indian States; panel data (search for similar items in EconPapers)
JEL-codes: H52 H72 H77 I22 J18 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2023-04
New Economics Papers: this item is included in nep-ure
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Journal Article: Impact of transfers on elementary education expenditure and measuring equalisation transfers to Indian States (2023)
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