Browsing through 34 years of state finances in India: Insights for the Sixteenth Finance Commission (With Dr K. Pradeep and Prof. K.S. Hari) (Published in Economic And Political Weekly)
In this article, we look at the fiscal behaviour of the states in India for the period from Ninth FC (1990-91 to 1994-95) to Fifteenth FC (2020-2021 to 2023-24). The purpose is to draw insights from the past fiscal behavior of the states. We have adopted an integrated approach wherein fiscal consolidation on the revenue account, federal fiscal transfers, and the FRBM Act are analyzed in a single framework. We observe that the above-mentioned aspects influence the capital expenditure of the states. During the Twelfth Finance Commission period, states reported some positive fiscal behaviors such as fiscal consolidation efforts on revenue account, increase in capital expenditure, and reduction in fiscal deficit. However, during the Fourteenth FC period and subsequently, the states diverted from these positive aspects. Therefore, we argue that the Sixteenth FC should take the integrated approach and ensure the reverting of the states to the desired fiscal behavior.
Evaluation of State Finances of Maharashtra for the XIV th Finance Commission (With Prof. K.S. Hari, et al)
The XVIth Finance Commission entrusted the task of analysing the State Finances of Maharashtra to the Gokhale Institute of Politics and Economics, Pune. The report thus prepared for the Sixteenth Finance Commission focuses on fourteen different aspects of the Maharashtra's finances in as many chapters based on the terms of reference received from the Finance Commission. My work in particular in the report focuses on the issues of debt and debt sustainability, along with writing and editing major portions of the document.
Fiscal Prudence at the Expense of Capital Expenditure. A study on Maharashtra’s Fiscal Management. (With Prof. K.S. Hari and Dr K. Pradeep) (Working Paper)
In this paper, we look at the Maharashtra state government’s fiscal management and contend that the state is fiscally over-prudent in the management of its finances since the enactment of the MFRBM Act, 2005. This has adversely affected the capital expenditure on developmental activities by the State. Sustainability of Maharashtra’s public debt is addressed using econometric approaches of unit-root and cointegration. We further examine the capital accounts of the state and the evolution of expenditure in certain areas which are a cause of concern. Further, we propose that the state can increase capital expenditure in favor of developmental activities by relaxing its stance of strict maintenance of fiscal deficit and instead taking on more debt to supplement its capital expenditure along with ensuring the sustainability of its fiscal policy.
Soaring Debt, Rising Concerns - The Need for Putting Fiscal Domain of States in Order. (With Prof. K.S. Hari and Dr K. Pradeep) (Working Paper)
The paper endeavours to analyze the rising debt level of states observed during the last decade. After reducing the debt level post-FRBM Act for a decade, the reversal trend recently observed. The factors that once helped in reducing debt levels post-FRBM Act for a decade are not likely to be available in the near future. Our analysis indicates that reducing the debt level without hurting sufficient capital expenditure is a daunting task ahead even if we were to expect the most desirable fiscal behavior by the states. The present study proposes a methodology for determining the debt consolidation path for each state by incorporating desired fiscal behavior of states, sufficient capital expenditure, and federal fiscal transfers. The proposed methodology would ensure reduction in state-level debt to GSDP ratio in more meaningful and desirable manner with quality of fiscal consolidation.