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Intergovernmental Fiscal Transfers and Tax Collection of Indian States: Estimation from Panel Data Models

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  • Kumar Sumit

    (Punjab School of Economics, Faculty of Economics and Business, Guru Nanak Dev University, Amritsar, India)

  • Kaur Baljit

    (Punjab School of Economics, Faculty of Economics and Business, Guru Nanak Dev University, Amritsar, India)

Abstract

This study tries to empirically estimate the effects of the composition of intergovernmental transfers on tax collection across the Indian states by using panel regression model. As intergovernmental transfers constitute almost 47 per cent in total revenue of the states, it could play a vital role in states’ own tax collection. The impact of different channels of federal transfers on tax capacities is examined among 25 Indian states over the period from 1991-92 to 2017-18. The study also attempted to capture the asymmetric effect of various forms of transfers, but findings reveal that only state plan grant has a significant effect on its own tax collection. The empirical evidence suggests that the composition of intergovernmental transfers has a dampening effect on states’ own tax revenue. Apart from transfers’ variables, the study incorporates socio-economic and certain political variables to estimate states’ own tax collections.

Suggested Citation

  • Kumar Sumit & Kaur Baljit, 2023. "Intergovernmental Fiscal Transfers and Tax Collection of Indian States: Estimation from Panel Data Models," Acta Universitatis Sapientiae, Economics and Business, Sciendo, vol. 11(1), pages 258-271, October.
  • Handle: RePEc:vrs:auseab:v:11:y:2023:i:1:p:258-271:n:8
    DOI: 10.2478/auseb-2023-0012
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    References listed on IDEAS

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    More about this item

    Keywords

    intergovernmental transfers; political factors; state tax collection; Indian states;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • P35 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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