Munich Personal RePEc Archive

Federal Transfers and the Tax efforts of the States in India

K., Jothi Sivagnanam and M., Naganathan (1999): Federal Transfers and the Tax efforts of the States in India. Published in: Indian Economic Journal , Vol. volume, No. part 4 (2000): pp. 101-110.

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The paper has examined the the impact of federal fiscal transfers on the budget of the state (sub-central) governments in India. The relationship between the federal fiscal transfers and the tax efforts of the 14 major Indian states have been anlysed for fifteen years (from 1970-71 to 1984-85)through a panel dadat set. Fixed efeect model and its variants have been employed. The study found that the federal transfers have dampaned the tax efforts of states in India. Hence, a hiher weightaege for the 'tax effort criterion' has been suggested in the vertical devolution formula of the Indian Finance Commission to ensure efficiency.

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