Profligate or Prudent: The Efficacy of Development Expenditures in Indian States

• Main Author: Balderston, Anna
• Format: Others
• Published: Scholarship @ Claremont 2018
• Subjects: Development; Fiscal policy; Budget deficits; India; Economic Development; International Economics
• Online Access: http://scholarship.claremont.edu/cmc_theses/1730; http://scholarship.claremont.edu/cgi/viewcontent.cgi?article=2887&context=cmc_theses

This study examines the relationship between state-wise development expenditures and observed levels of development under the umbrella of the Reserve Bank of India’s implicit guarantee of state bonds. By analyzing the correlation between certain variables outside of each state’s control and levels of development, this thesis aims to determine which Indian states outperform or underperform their predicted levels of development. Moreover, it will aim to identify patterns of development expenditure that led to outperformance or underperformance. States that underperform predicted levels of development while spending above the state-wise average on relevant development sectors can be said to have squandered development expenditures, while those that outperform predicted levels while spending below the state-wise mean likely spend more efficiently. Both of these observations have implications for the central bank’s implicit guarantee policy.