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Finance Commission of India’s Assessments: A Political Economy Contention between Expectations and Outcomes

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  • Rathin Roy

Abstract

The objective of this study is to examine the structural basis on which Finance Commissions make their awards rather than examining the predictability of the forecasts. The story of Finance Commissions assessments reflects an interesting political economy theatre of contention between aspirations and outcomes. Our key findings are as follows: Firstly, source of errors for assessments of tax revenue, non-tax revenue, interest payments, defence revenue expenditure, plan revenue expenditure and fiscal deficit is principally due to random component. However the errors in the remaining economic parameters originate due to systemic components i.e. mean and slope errors. Secondly, the expenditure side predictability is lower than the revenue side predictability.

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  • Rathin Roy, 2015. "Finance Commission of India’s Assessments: A Political Economy Contention between Expectations and Outcomes," Working Papers id:6581, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:6581
    Note: Institutional Papers
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    Cited by:

    1. Shrestha, Ruzel & Chakraborty, Lekha, 2019. "Practising Subnational Public Finance in an Emerging Economy: Fiscal Marksmanship in Kerala," Working Papers 19/261, National Institute of Public Finance and Policy.
    2. Chakraborty, Lekha & Chakraborty, Pinaki & Shrestha, Ruzel, 2019. "Budget Credibility of Subnational Governments: Analyzing the Fiscal Forecasting Errors of 28 States in India," Working Papers 19/280, National Institute of Public Finance and Policy.

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