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Examining Sustainability of Federal Finances in India: An Application of Non-stationary Panel Methods

Deba Prasad Rath and Biswa Misra ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the fiscal sustainability of Indian States during the 1990s on the basis of their budgetary data. Sustainability has been discussed using the inter-temporal budget constraint framework and has been tested by applying the panel co-integration technique. The panel analysis reveals that revenue receipts and revenue expenditures are co-integrated across the States. Further, the insensitivity of the results to the choice of the period of analysis attests the robustness of the result that the State finances in India may not be unsustainable.

Keywords: State Finances; Panel Cointegration (search for similar items in EconPapers)
JEL-codes: E62 C33 (search for similar items in EconPapers)
Date: 2006
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