Indebtedness, Fiscal Discipline and Development Spending – A Non-parametric Approach

Abstract

Indian states exhibit considerable heterogeneity in terms of revenue
mobilizing capacities and efforts, development spending and fiscal dependence
on the central government. In this context, the paper compares the fiscal
performance of major Indian states in terms of two non-parametric performance
evaluation models for the period 2009–10 to 2014–15. The study thus uses
the conventional two stage framework for efficiency evaluation as well as the
two stage conditional performance model. The outcomes enable us to identify
front-runners as well as laggards in the area of fiscal management. Further,
the study showed that the gross capital formation experienced by the states
significantly influences state performance in India. However, the impact of
outstanding liabilities on efficiency performance was statistically insignificant.