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Fiscal Rule and Social Sector Spending: A Study of North-East India

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Understanding Development

Part of the book series: India Studies in Business and Economics ((ISBE))

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Abstract

The management of public finances continues to be a challenging task not only for the central government, but also for the states since the initiation of rule-based fiscal consolidation. The states have been facing severe fiscal constraints, particularly in sharing own funds for capital formation. The problem sounds acute when it comes to the northeastern (NE) region of India which is faced with several economic and social challenges including financial constraints, poor infrastructure and of course, the unfriendly attitude of the neighbouring states. An attempt is, therefore, made in this chapter to analyse the impact of fiscal rule on social sector spending of NE states of India.

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Notes

  1. 1.

    The discussion in this, and subsequent paragraphs of this section is based on the tables compiled from Handbook of Statistics on State Government Finances 2010 and State Finances: a Study of Budgets (various issues) of the Reserve Bank of India. These tables are not produced in this paper to conserve the space, however, the same are available from the author upon request.

  2. 2.

    All variables (dependent and independent) considered in per capita terms are at 2004–2005 prices deflated using implicit GSDP deflator.

  3. 3.

    For an evidence of cyclicality of expenditure across selected Indian states, see Reserve Bank of India (2014).

  4. 4.

    Real effective interest rate is calculated by subtracting expected inflation rate from nominal interest rate. Nominal interest rate is obtained by dividing the interest payments in year t by the outstanding liability in year t−1 and multiplied the result by 100. The expected rate of inflation is estimated as the 2-year moving average of the inflation rate based on implicit GSDP deflator.

  5. 5.

    For detail of estimation methods, see Baltagi (2005), Baltagi and Chang (1994) and Wooldridge (2002).

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Author information

Authors and Affiliations

  1. Department of Economics, Jadavpur University, 700032, Kolkata, India

    Vikas Dixit

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  1. Vikas Dixit
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Correspondence to Vikas Dixit .

Editor information

Editors and Affiliations

  1. Department of Economics, Jadavpur University, Kolkata, West Bengal, India

    Swapnendu Banerjee

  2. Department of Economics, Jadavpur University, Kolkata, West Bengal, India

    Vivekananda Mukherjee

  3. Department of Economics, Jadavpur University, Kolkata, West Bengal, India

    Sushil Kumar Haldar

Appendix

Appendix

Appendix Table 11.1 Per capita finance commission transfers to states ( ₹ ). (Source: compiled from Srivastava and Rao (2009).
Full size table
Appendix Table 11.2 Total transfers from the centre as percentage of revenue receipts: special category states. (Source: Same as for Appendix Table 11.1)
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Appendix Table 11.3 Total transfers from the centre as percentage of revenue expenditure: special category states. (Source: Same as for Appendix Table 11.1)
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Dixit, V. (2016). Fiscal Rule and Social Sector Spending: A Study of North-East India. In: Banerjee, S., Mukherjee, V., Haldar, S. (eds) Understanding Development. India Studies in Business and Economics. Springer, New Delhi. https://doi.org/10.1007/978-81-322-2455-6_11

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  • DOI: https://doi.org/10.1007/978-81-322-2455-6_11

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