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Fiscal Reforms, Fiscal Rule and Development Spending: Two Decades of Indian Experience

In: Market, Regulations and Finance

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  • Pinaki Chakraborty

    (National Institute of Public Finance and Policy)

Abstract

This chapter examines the interrelationship between fiscal reforms, fiscal rules and development spending. The objective is to understand the impact of state-level Fiscal Responsibility Act (FRA) on development spending. FRA introduced a fixed numerical ceilings on borrowing for subnational governments in India, which in a way put an upper limit on the fiscal space for spending given the resource envelope. The chapter observes that post FRA, states have witnessed significant improvement in fiscal balance. The econometric estimates reveal that improvement in fiscal balance at the subnational level is largely revenue driven, and revenue cyclicality has altered the fiscal space for development spending with an increase in spending disparity across states.

Suggested Citation

  • Pinaki Chakraborty, 2014. "Fiscal Reforms, Fiscal Rule and Development Spending: Two Decades of Indian Experience," India Studies in Business and Economics, in: Ratan Khasnabis & Indrani Chakraborty (ed.), Market, Regulations and Finance, edition 127, chapter 6, pages 83-94, Springer.
    • Handle: RePEc:spr:isbchp:978-81-322-1795-4_6
    DOI: 10.1007/978-81-322-1795-4_6
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    Cited by:

    1. J.S. Darshini & K. Gayithri, 2023. "An Econometric Analysis of Revenue Diversification Among Selected Indian States," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 24(1), pages 41-63, March.

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