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Growth Convergence and Public Finances of India and its States

Author

Listed:
  • Mr. Rajan Govil
  • Khyati Chauhan

Abstract

Lack of convergence in per capita income across Indian states requires greater resources for lower-income states for investment and improved public services. Central and state governments need to raise revenue (both tax and non-tax), dismantle the administered pricing mechanism, reduce subsidies, and reorient expenditure toward national and state-level priorities. This is essential to ensure India remains on a sustainable fiscal path with higher growth, given the high public debt at the centre and state level. The observed wide differences in fiscal parameters across states require a tailored policy for each state. The large stock of debt of several states puts at risk the adequate financing of growth-enchancing expenditures.

Suggested Citation

  • Mr. Rajan Govil & Khyati Chauhan, 2024. "Growth Convergence and Public Finances of India and its States," IMF Working Papers 2024/235, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2024/235
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