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Living under Fiscal Rules: Fiscal Management Response and Resource Allocation Choices for State of Odisha

Author

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  • Jena, Pratap Ranjan

    (National Institute of Public Finance and Policy)

Abstract

The paper assesses the remarkable success story of State of Odisha in making fiscal correction after adopting the fiscal rules and the policy responses. The degree of correction was one of the highest among the Indian States. The tradeoff between fiscal restraint and the development priorities assumes significance as a relatively economically weak State like Odisha maintained a very low-deficit regime by limiting the public spending for a long time. The paper highlights that while fiscal discipline improves the ability of the Government to prioritize among policy choices and improve operational management, strict imposition of self-restraint and large adjustments may lead to distortions. After a decade of controlled fiscal management, as the State has started opening up by expanding the public spending, the shrinking fiscal space, slow growth of internal revenue, and high dependence on Central funds present new challenges. The paper examines the institutional reforms in this context to address emerging fiscal architecture.

Suggested Citation

  • Jena, Pratap Ranjan, 2019. "Living under Fiscal Rules: Fiscal Management Response and Resource Allocation Choices for State of Odisha," Working Papers 19/264, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:19/264
    Note: Working Paper 264, 2019
    as

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    File URL: https://www.nipfp.org.in/media/medialibrary/2019/05/WP_264_2019.pdf
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    References listed on IDEAS

    as
    1. Shrestha, Ruzel & Chakraborty, Lekha, 2019. "Practising Subnational Public Finance in an Emerging Economy: Fiscal Marksmanship in Kerala," Working Papers 19/261, National Institute of Public Finance and Policy.
    2. James Brumby & Richard Hemming, 2013. "Medium-Term Expenditure Frameworks," Palgrave Macmillan Books, in: Richard Allen & Richard Hemming & Barry H. Potter (ed.), The International Handbook of Public Financial Management, chapter 10, pages 219-236, Palgrave Macmillan.
    3. Ana Corbacho & Teresa Ter-Minassian, 2013. "Public Financial Management Requirements for Effective Implementation of Fiscal Rules," Palgrave Macmillan Books, in: Richard Allen & Richard Hemming & Barry H. Potter (ed.), The International Handbook of Public Financial Management, chapter 2, pages 38-62, Palgrave Macmillan.
    4. Jena, Pratap Ranjan, 2010. "India Public Expenditure and Financial Accountability: Public Financial Management Performance Assessment Report," Working Papers 1/10, National Institute of Public Finance and Policy.
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    Cited by:

    1. Pandey, Radhika & Patnaik, Ila, 2019. "Financial sector reforms in India," Working Papers 19/267, National Institute of Public Finance and Policy.
    2. Mukherjee, Sacchidananda, 2019. "State of Public Finance and Fiscal Management in India during 2001-16," Working Papers 19/265, National Institute of Public Finance and Policy.

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    More about this item

    Keywords

    Sub-national fiscal policy ; fiscal federal system ; Fiscal rules ; Budgeting system ; Medium term perspective;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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