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Assessing Public Expenditure Efficiency at Indian States

Ranjan Kumar Mohanty () and N R Bhanumurthy ()
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Ranjan Kumar Mohanty: National Institute of Public Finance and Policy

Working Papers from National Institute of Public Finance and Policy

Abstract: In recent times, the issue of public expenditure efficiency has drawn the attention of both policymakers and researchers globally. Even in India, with the increased demands for Outcome-based Budgeting, the assessment of public expenditure efficiency becomes much more crucial. Towards this direction, by using outlays-outcome framework, the pa-per attempts to measure the efficiency of government expenditures on Social Sector, es-pecially health and education, among the Indian States using various DEA approaches. Further, the paper also attempts to understand what drives the public expenditure effi-ciency among the States. For this, it looks at the role of economic growth as well as quality of governance. The results of input-oriented and output-oriented DEA approach finds a large variation in the efficiency of public spending as well as scope for resource saving among Indian States. The results suggest that States are spending their resources more efficiently on education than on health and overall social sector spending. Further, it also finds that both quality of governance and economic growth affects the efficiency of edu-cation, health, and social sector with governance to have larger effect compared to growth. Overall, the study suggests that focus on good governance could yield better out-comes from public spending.

Keywords: Public Expenditure; Education; Health; Data Envelopment Analysis; India (search for similar items in EconPapers)
JEL-codes: H51 H52 I18 I21 C14 O53 (search for similar items in EconPapers)
Date: 2018-03
Note: Working Paper 225, 2018
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