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Expenditure Implications of India's State-level Fiscal Crisis

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  • Stephen Howes
  • Rinku Murgai
  • Marina Wes

Abstract

India's states have significant developmental expenditure responsibilities. While the "fiscal crisis" which engulfed India's states in the late nineties led to higher deficits and debt levels, it was also associated with a rapid increase in expenditure levels, and it might be thought that this would have increased the development effectiveness of the state governments. However, a closer look at the data reveals that this is not the case. The main positive fiscal development in the post 1996/97 period is a pick up in real growth in government capital expenditure. In other respects, the fiscal crisis weakened the developmental and poverty impact of state governments especially in the poor states. Real growth of expenditure in health and education slowed, in some cases halted, and the efficiency of government expenditure fell as liquidity constraints tightened and non-salary expenditures were crowded out.

Suggested Citation

  • Stephen Howes & Rinku Murgai & Marina Wes, 2004. "Expenditure Implications of India's State-level Fiscal Crisis," ASARC Working Papers 2004-15, The Australian National University, Australia South Asia Research Centre.
  • Handle: RePEc:pas:asarcc:2004-15
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    File URL: https://crawford.anu.edu.au/acde/asarc/pdf/papers/2004/WP2004_15.pdf
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    References listed on IDEAS

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    1. Shenggen Fan & Peter Hazell & Sukhadeo Thorat, 2000. "Government Spending, Growth and Poverty in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 1038-1051.
    2. Pritchett, Lant & Filmer, Deon, 1999. "What education production functions really show: a positive theory of education expenditures," Economics of Education Review, Elsevier, vol. 18(2), pages 223-239, April.
    3. Elena Glinskaya & Michael Lokshin, 2007. "Wage differentials between the public and private sectors in India," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(3), pages 333-355.
    4. Jalan, Jyotsna & Ravallion, Martin, 2003. "Does piped water reduce diarrhea for children in rural India?," Journal of Econometrics, Elsevier, vol. 112(1), pages 153-173, January.
    5. Dreze, Jean & Goyal, Aparajita, 2003. "Future of Mid-Day Meals," MPRA Paper 17386, University Library of Munich, Germany.
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