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Grants-in-Aid and State Domestic Product: An Empirical Analysis in India

In: Challenges and Issues in Indian Fiscal Federalism

Author

Listed:
  • Sajad Ahmad Bhat

    (University of Hyderabad)

  • Aadil Ahmad Ganaie

    (University of Hyderabad)

  • Naseer Ahmed Khan

    (University of Hyderabad)

  • Bandi Kamaiah

    (University of Hyderabad)

Abstract

The smooth transfer of the finances keeping in view the objectives and the requirements of the different levels of the government is an indicator of the healthy federal system. Further, it demarcates the degree of decentralization that exists within a federation. This study examines the relationship between Grants-in-Aid taken as a measure of fiscal decentralization and state domestic product in case of India using panel data for 14 non-specialized states for the period 1981–2014. The results showed that long-run equilibrium relationship exists between the two. The estimates from FMOLS, and dynamic OLS (DOLS) framework revealed that Grants-in-Aid have a positive and significant impact on the state domestic product. So from this angle, it is centralization that is growth enhancing, not decentralization. However, the study failed to detect the true nature of the causation between these two.

Suggested Citation

  • Sajad Ahmad Bhat & Aadil Ahmad Ganaie & Naseer Ahmed Khan & Bandi Kamaiah, 2018. "Grants-in-Aid and State Domestic Product: An Empirical Analysis in India," India Studies in Business and Economics, in: Naseer Ahmed Khan (ed.), Challenges and Issues in Indian Fiscal Federalism, chapter 0, pages 107-120, Springer.
    • Handle: RePEc:spr:isbchp:978-981-10-6217-9_9
    DOI: 10.1007/978-981-10-6217-9_9
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    Cited by:

    1. Nupur Nirola & Sohini Sahu & Atrayee Choudhury, 2022. "Fiscal decentralization, regional disparity, and the role of corruption," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(3), pages 757-787, June.

    More about this item

    Keywords

    Grants-in-Aid; GSDP; DOLS; India;
    All these keywords.

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