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Central Transfer a Curse or Blessing? Evidence from the Relative Revenue Effort of Indian States

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  • Avipsa Mohanty
  • Dinabandhu Sethi
  • Asit Ranjan Mohanty

Abstract

This paper evaluates the revenue effort of Indian states during the 13th and 14th Finance Commission periods and estimates the impact of central transfers recommended by the Finance Commission on the relative revenue effort of states. Using panel data the study finds that Bihar, Uttar Pradesh, Madhya Pradesh, Assam and Kerala are the top five states with the greatest relative revenue effort. Further, the impact of central transfers on revenue effort was found to be negative, suggesting that greater devolution encourages laxity in the state's tax collection efficiency by providing perverse incentives.

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  • Avipsa Mohanty & Dinabandhu Sethi & Asit Ranjan Mohanty, 2020. "Central Transfer a Curse or Blessing? Evidence from the Relative Revenue Effort of Indian States," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 53(2), pages 214-227, June.
    • Handle: RePEc:bla:ausecr:v:53:y:2020:i:2:p:214-227
    DOI: 10.1111/1467-8462.12358
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    References listed on IDEAS

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    Cited by:

    1. Kumar Sumit & Kaur Baljit, 2023. "Intergovernmental Fiscal Transfers and Tax Collection of Indian States: Estimation from Panel Data Models," Acta Universitatis Sapientiae, Economics and Business, Sciendo, vol. 11(1), pages 258-271, October.

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