Journal Press India®

Federal Finance in India: An Analysis of Discretionary Transfers

Vol 4, Issue 1, January - June 2017 | Pages: 1-18 | Research Paper  

 
Article has been added to the cart.View Cart (0)
https://doi.org/10.17492/vision.v4i01.9990


Author Details ( * ) denotes Corresponding author

1. * Chittaranjan Nayak, Assistant Professor, Department of Economics, Ravenshaw University, Cuttack, Odisha, India (chittaranjan.ru@gmail.com)
2. Priyabrata Satpathy, Ph. D. Research Scholar, Department of Economics, Ravenshaw University, Cuttack, Odisha, India (psatpathy.satpathy@gmail.com)

The essence of federalism lies in proper division of powers and functions among various levels of government to ensure adequate resources for their functioning. Although a formula-based practice has been mandated by the Indian Constitution through the setting up of the Finance Commission of India, there are several breaks in the practice. Some of the Central transfers are formula-based but there is considerable discretion in allocating other classes of transfers. In the era of Coalition politics there has been increasing disquiet, especially by the states ruled by opposition parties about alleged partisan behaviour by the Centre in the allocation of discretionary transfers. The present paper makes an attempt to examine the level, composition and disparity in per capita discretionary transfers from the Centre to the states; and explore the determinants of discretionary transfers. Two time points, viz. 2001-02 and 2011-12 are considered since the study has used census data for some variable. The empirical results show that there is significant diversity in the level of discretionary transfers to states. However, the disparity is not due to political factors. The states with higher fiscal deficit have got more discretionary transfers than the states having lesser deficit. Special category states get higher discretionary transfers as it is inherent in the structure of such transfers.

Keywords

Federal finance; Discretionary transfers; Fiscal balance; Finance Commission; Political determinants

  1. Arulampalam, W.,  Dhillon, A., Dasgupta, S., & Bhaskar, D. (2009). Electoral goals and Centre state transfers: A theoretical model and empirical evidence from India. The Journal of Development Economics, 88(1), 103-119.
  2. Biswas, R., Marjit, S., & Marimoutou, V. (2009). Fiscal federalism, state lobbying and discretionary finance: Evidencefrom India. Economics and Politics, 22(1), 68-91.
  3. Buchanan, J. (1950). Federalism and fiscal equity. American Economic Review, 40(4), 583-99.
  4. Dasgupta, S., Dhillon, A., & Dutta, B. (2004). Electoral goals and centre-state transfers: A theoretical model and empirical evidence from India. Retrieved from http://citeseerx. ist.psu.edu/viewdoc/download?doi=10.1.1.471.839&rep=rep1&type=pdf
  5. Dash, B.B., & Raja, A. (2012). Political determinants of the allocation of public expenditures: A study of the Indian states. NIPFP Working Paper No. 2012-101, New Delhi.
  6. Dixit, A., & Londregan, J. (1996).The determinants of success of special interests in redistributive politics. The Journal of Politics, 58(4), 1132-1155.
  7. ET Bureau (2016, July 20). Niti Aayog may tell states to align with centre’s vision. The Economic Times, p.15, Delhi.
  8. Gramlich,  E.M. (1977).  Intergovernmental grants: A review of the empirical literature. In W. E. Oates (Ed.). The Political Economy of Fiscal Federalism, pp. 219-240. Lexington: Lexington Books, D.C. Heath and Company.
  9. Khemani, S. (2003). Partisan politics and intergovernmental transfers in India. Development Research Group Working Paper No. 3016, The World Bank.
  10. Lindbeck, A., & Weibull, J. (1987).Balanced budget redistribution as the outcome of political competition. Public Choice, 52(3), 273-297.
  11. Oates, W. (1972). Fiscal federalism. New York, NY: Harcourt-Brace-Jovanovich.
  12. Panda, P.K. (2016). Economic and political determinants of central fiscal transfer in India: A dynamic panel analysis of state level data. The Journal of Developing Areas, 50(2), 329-347.
  13. Rao, M. G., & Singh, N. (2000). The political economy of centre-state fiscal transfers in India. Paper presented at the Columbia University- World Bank Conference on Institutional Elements of Tax Design and Reform, February 18-19, New York: Columbia University.
  14. Riker, W. (1975). Federalism. In F. I. Greenstein and N. W. Polsby, (Eds.). Handbook of political science. (pp. 75-85). Massachusetts: Addison-Wesley.
  15. Singh, N., & Vasishtha, G. (2004). Some patterns in centre-state fiscal transfers in India: An illustrative analysis. SSCIE Working Paper No. 4-18, Santa Cruz Centre for International Economics: University of California.
Abstract Views: 188
PDF Views: 121

Advanced Search

News/Events

Institute of Managem...

Deccan Education Society Institute of Management Development and Re...

S.B. Patil Institute...

Pimpri Chinchwad Education Trust's S.B. Patil Institute of Mana...

D. Y. Patil IMCAM, A...

D. Y. Patil Institute of Master of Computer Applications & Managem...

Vignana Jyothi Insti...

Vignana Jyothi Institute of Management International Conference on ...

Department of Commer...

Department of Commerce, Faculty of Commerce & Business, University...

Birla Institute of M...

Birla Institute of Management Technology (BIMTECH) 3rd Pritam Singh M...

OP Jindal University...

OP Jindal University, India 4th International Conference on  ...

Department of MBA, N...

Department of MBA, Narayana Engineering College Nellore International...

Vignana Jyothi Insti...

Vignana Jyothi Institute of Management Conference Proceedings,...

Online Proceedings R...

Conference Proceedings, March 2023 ISBN: 978-81-956810-6-8 ...

By continuing to use this website, you consent to the use of cookies in accordance with our Cookie Policy.