Federal Transfers and Fiscal Discipline in India: An Empirical Evaluation

Arbeitspapier

This paper examines the relationship between federal transfers and fiscal deficits in India. The system of federal transfers has been criticized on the grounds that it distorts the incentives for states to promote fiscal discipline. We analyze the relationship between transfers, state domestic product, and fiscal deficit for a panel of states during the period 1990–2010. The paper finds a positive long-run relationship and bi-directional causality between primary/gross fiscal deficits and non-plan transfers. Further, a negative long-run relationship and one-way causality between state domestic product and transfers is observed, with causality going from state product to transfers. These results are confirmed by multi-variate cointegration analysis, which finds a long-run relationship between fiscal transfers, state product per capita and the primary deficit of the states. The evidence in the paper is consistent with the system of fiscal transfers being "gap- filling."

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ADB Economics Working Paper Series ; No. 343

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; Intergovernmental Relations; Federalism; Secession ; Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
• Subject: federal transfers ; India ; public finance ; panel cointegration ; panel ECM ; Finanzbeziehungen ; Haushaltsdefizit ; Kointegration ; Panel ; Schätzung ; Teilstaat ; Indien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bhatt, Antra ; Scaramozzino, Pasquale
• Event: Veröffentlichung
• (who): Asian Development Bank (ADB)
• (where): Manila
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/109476
• Last update: 10.03.2025, 11:43 AM CET