IDEAS home Printed from
   My bibliography  Save this article

Growth Effects of Fiscal Policy of India States


  • Pushpa Trivedi

    (Professor, Department of Humanities and Social Sciences, Indian Institute of Technology Bombay)

  • Rajmal

    (Assistant Adviser, Department of Economic Analysis and Policy Research, Reserve Bank of India and currently on Deputation as the Officer on Special Duty, External Debt Management Unit, Ministry of Finance, Government of India)


As witnessed in the recent past, lopsided regional development has become a threat to inter-state migration in India. This can also thwart the peace and security in the country. No wonder then that development has become an electoral agenda at the state level. The development deficit at the state level is being taken cognisance of not only by the academicians but by political leadership as well. In view of this, this paper examines the role of fiscal policy implemented by the states in reducing the regional disparities in the economic growth across states. We examine the growth effects of fiscal policy instruments of the major states of India during the period 1980-81 to 2006-07, using the panel data approach. The study finds that fiscal deficits of the states result in contraction of growth. As regards the impacts of the various items that constitute the fiscal deficit, viz., taxes, revenue expenditures and capital expenditures, the impact of each of these items on the growth of the states has been found to differ. Capital expenditures, particularly those on transport, communications and education are found to promote economic growth, albeit with a time lag. The study also raises concerns over the deterioration in the quality of fiscal deficit of states due to its adverse implications on economic growth. Based on the empirical results, we advocate increased capital expenditure at the state level as an integral part of the strategy for regionally-balanced growth. A positive externality of this strategy could also reduce expenditure on the internal aggression across the states of India.

Suggested Citation

  • Pushpa Trivedi & Rajmal, 2011. "Growth Effects of Fiscal Policy of India States," Millennial Asia, , vol. 2(2), pages 141-162, July.
  • Handle: RePEc:sae:millen:v:2:y:2011:i:2:p:141-162

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Sarah K. S. Shannon & Christopher Uggen & Jason Schnittker & Melissa Thompson & Sara Wakefield & Michael Massoglia, 2017. "The Growth, Scope, and Spatial Distribution of People With Felony Records in the United States, 1948–2010," Demography, Springer;Population Association of America (PAA), vol. 54(5), pages 1795-1818, October.
    2. Calogero Carletto & Jennica Larrison & Çaglar Özden, 2014. "Informing migration policies: a data primer," Chapters, in: Robert E.B. Lucas (ed.), International Handbook on Migration and Economic Development, chapter 2, pages 9-41, Edward Elgar Publishing.
    3. Stegelin, Forrest E. & Esalante, Cesar L & Fonsah, Esendugue Greg & Kightlinger, Keith D., 2011. "Farm and Agribusiness Labor: Spotlight on Georgia’s Produce Industry," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 29(2).
    4. Huzeyfe Torun & Semih Tumen, 2017. "The empirical content of season-of-birth effects: An investigation with Turkish data," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 37(57), pages 1825-1860.
    5. Bahrs, Michael & Schumann, Mathias, 2016. "Unlucky to Be Young? The Long-Term Effects of School Starting Age on Smoking Behaviour and Health," hche Research Papers 2016/13, University of Hamburg, Hamburg Center for Health Economics (hche).
    6. Atalay, Yasemin & Kalfagianni, Agni & Pattberg, Philipp, 2017. "Renewable energy support mechanisms in the Gulf Cooperation Council states: Analyzing the feasibility of feed-in tariffs and auction mechanisms," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 723-733.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:millen:v:2:y:2011:i:2:p:141-162. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.