ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Indira RajaramanSubscribe to Indira Rajaraman

Fiscal Transfers for Forest Cover

The costs of preserving forest cover are borne jurisdictionally, but the benefits accrue externally. To compensate for this, the national government has paid an annual forest grant to the states since 2005. We construct a model to show why it has not prevented a decline in cover in highly forested states over 2007–2019, while a rise is seen in states with low initial cover. The implications are explored.


Is the 14% Revenue Guarantee to States Justified?

When the goods and services tax was introduced in July 2017, states were given a revenue guarantee of 14% per annum on their GST revenue over the base year 2015–16. Using data on revenue from subsumed taxes for 24 states and two union territories during the years 2012–16 preceding the GST, it is investigated whether the 14% revenue guarantee was justified. Not many states had a growth rate of subsumed taxes higher than 14% pre-GST, with most of them falling in the 5%–12% growth rate band. It is estimated that the potential savings in the compensation payment due from 1 July 2017 to 31 March 2020—if the states were assured of compensation at their respective historically achieved tax buoyancy—would have ranged between ₹ 1.8 lakh crore and ₹ 2.12 lakh crore.

Unique and Precious

The writer, an economist, was on the faculty of the Indian Institute of Management Bangalore, followed by the National Institute of Public Finance and Policy in Delhi. She was a member of the Thirteenth Finance Commission, whose recommendations covered the fiscal years 2010-15 and has regularly published research papers and book reviews in this journal. Here, she writes about why she thinks the EPW is an "incredible institution."

Preserving the Incentive Properties of Statutory Grants

This paper investigates flows from the centre in respect of the two-part grant for local governments prescribed by the Thirteenth Finance Commission with unconditional and conditional components, covering 2010-15. There is evidence that fiscal compulsions at the centre bent the structure of the grant away from that envisioned by the TFC, and that its incentive properties were thereby not preserved. Local governments are the nodes at which the sustainable development goals for improved sanitation and public health have to be delivered. This is the level at which public finance attention has to be focused.

Understanding the Indian Economy

India's Evolving Economy: Puzzles and Perspectives by A Vaidyanathan (Delhi: Academic Foundation), 2014; pp 348, Rs 1,195, hardback.

Spatial Distribution of Public Services within States in India

Equitable distribution of public services with a local spatial reach poses a challenge where fiscal resource limitations permit universal coverage only as an eventual target. In a federal structure, where the allocation of local public services is devolved to subnational governments, the allocation pattern itself could vary between jurisdictions. This paper investigates the locational pattern of public service delivery points within states in India, using data from the Census Village Directory. Policy directions emerge from the empirical results.

Rural Housing Quality as an Indicator of Consumption Sustainability

An exogenously defined poverty line yields poverty headcounts between any two points in time that are a net outcome of the two-way traffic into and out of poverty. This paper argues that, for the rural Indian context, where housing is too lumpy and illiquid to be used for consumption smoothing, transitions in housing quality in cross-sectional data sets can provide revealed evidence of household perceptions of downside risk to their current consumption levels. Using the two most recent National Sample Survey housing surveys (the 58th round for 2002 and the 65th round for 2008-09), composite housing quality classifications are unbundled, and binary wall quality is selected from cross-quartile behaviour as the feature most responsive to rising household consumption levels. In both rounds, the incremental move to better quality declines beyond the consumption level at which half of all households are in better quality structures. The threshold consumption level at which this happens was lower in 2008-09 than in 2002 and reflects an improvement in housing conditions over the period. However, this effective saturation of the demand for the most basic element of better housing, much before actual saturation, provides a quantitative measure of the percentage of households even in the topmost quartile that fears downside consumption risk.

Response to Rakshit on the Finance Commission

Response to Rakshit on the Finance Commission Indira Rajaraman and 13% in the first two years, followed by 13.5% in the last three years, did not factor in the output gap in the pre-award year 2009-10.

Decentralisation, Preference Diversity and Public Spending: Health and Education in India

Education and health are commonly devolved functions to sub-national governments, even in nations which have a unitary rather than a federal structure. This paper investigates, for the specific case of a federal country like India, whether differences between states in shares of public spending on health and education show convergence over time, and the impact of episodic horizontal partitioning of states on this process. Our analysis rejects the hypothesis that preferences for health across state level jurisdictions are becoming more uniform over time, but for education, there is evidence of convergence, albeit at a low rate.

Raja Chelliah (1922-2009)

A tribute to Raja Chelliah, the public finance expert who also built two institutions in New Delhi and Chennai, and who died in early April.

Rural Unemployment 1999-2005: Who Gained, Who Lost?

There is an overall rise in rural unemployment, in terms of both total and partial failure to find work during the reference week, between the 55th (1999-2000) and 61st (2004-05) round employment surveys of the National Sample Survey. This is something of a puzzle given the reported rise in monthly per capita rural expenditure between the two rounds. The decline in unemployment among males with secondary school or higher education, relative to illiterate males, suggests that the rise in rural prosperity closely matches the pattern of access to rural school facilities. Of the four disadvantaged groups tested for, scheduled tribes face the highest incremental unemployment, which remains unchanged into the 61st round. This is an important pointer to the required regional configuration of workfare programmes like the National Rural Employment Guarantee Scheme, and for the spread of rural schools.


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