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Equalization Transfers Policy Based on Expenditure Needs and Own Revenue Capacity of Indian State Governments

In: India’s Contemporary Macroeconomic Themes

Author

Listed:
  • K. R. Shanmugam

    (Madras School of Economics)

  • K. Shanmugam

    (Government of Tamil Nadu)

Abstract

This study addresses an important policy issue pertaining to the determination of equalization transfers to Indian States. It measures the revenue expenditure needs and own revenue fiscal capacity of States normatively and determines the equalization transfers in four alternative scenarios. The estimated amounts of equalization transfers for all 29 States range from ₹ 3,73,956 crore to ₹ 14,77,282 crore. These findings will be useful to policymakers and other researchers to design more effectively the transfers policy besides general-purpose transfers to address the resource gap such that the Indian States can provide a standard level of public services.

Suggested Citation

  • K. R. Shanmugam & K. Shanmugam, 2023. "Equalization Transfers Policy Based on Expenditure Needs and Own Revenue Capacity of Indian State Governments," India Studies in Business and Economics, in: D. K. Srivastava & K. R. Shanmugam (ed.), India’s Contemporary Macroeconomic Themes, chapter 0, pages 153-179, Springer.
    • Handle: RePEc:spr:isbchp:978-981-99-5728-6_7
    DOI: 10.1007/978-981-99-5728-6_7
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    More about this item

    Keywords

    Equalization transfers; Expenditure gaps; Revenue capacity; Indian states; Panel methodology;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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