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Some Patterns in Center-State Fiscal Transfers in India: An Illustrative Analysis

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  • Singh, Nirvikar
  • Vasishtha, Garima

Abstract

India’s federal system is distinguished by tax and expenditure assignments that result in large vertical fiscal imbalances, and consequent transfers from the central government to the state governments. Several channels are used for these transfers: the Finance Commission, the Planning Commission, and central government ministries. We use panel data on center-state transfers to examine how the economic and political importance of the states influences the level and the composition of per capita transfers to the states, as well as differences in temporal patterns of Planning Commission and Finance Commission transfers. We find evidence that states with indications of greater bargaining power seem to receive larger per capita transfers, and that there is greater temporal variation in Planning Commission transfers.

Suggested Citation

  • Singh, Nirvikar & Vasishtha, Garima, 2004. "Some Patterns in Center-State Fiscal Transfers in India: An Illustrative Analysis," Santa Cruz Department of Economics, Working Paper Series qt2722k3w2, Department of Economics, UC Santa Cruz.
    • Handle: RePEc:cdl:ucscec:qt2722k3w2
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    References listed on IDEAS

    as
    1. Khemani, Stuti, 2002. "Federal politics and budget deficits: evidence from the states of India," Policy Research Working Paper Series 2915, The World Bank.
    2. repec:npf:wpaper:15 is not listed on IDEAS
    3. Rajaraman, Indira, 2004. "Fiscal developments and outlook in India," Working Papers 04/15, National Institute of Public Finance and Policy.
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    Cited by:

    1. Sandhya Garg, 2015. "Spatial convergence in public expenditure across Indian states: Implication of federal transfers," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-028, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. A. Udayaadithya & Anjula Gurtoo, 2013. "Governing the local networks in Indian agrarian societies—an MAS perspective," Computational and Mathematical Organization Theory, Springer, vol. 19(2), pages 204-231, June.
    3. Prasant Kumar Panda, 2009. "Central Fiscal Transfers and States’ Own-Revenue Efforts in India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 3(3), pages 223-242, July.
    4. Mukherji, Arnab & Mukherji, Anjan, 2012. "Bihar: What Went Wrong? And What Changed?," Working Papers 12/107, National Institute of Public Finance and Policy.
    5. Garg, Sandya & Ashima Goyal & Rupayan Pal, 2014. "Why tax effort falls short of capacity in Indian states: A Stochastic frontier approach," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-032, Indira Gandhi Institute of Development Research, Mumbai, India.
    6. Nirvikar Singh & T.N. Srinivasan, 2004. "Indian Federalism, Economic Reform and Globalization," Public Economics 0412007, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H - Public Economics

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