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Dynamics of Government Budgets, Growth, and Welfare
The report of NITI Aayog titled “SDG India: Index and Dashboard 2020–21: Partnerships in the Decade of Action,” vividly portrays poorer states that lag behind the advanced states in the achievement of the sustainable development goals. This paper, which explores what hinders the effort of the poorer states in accessing resources from the centre and in reaching out to the poor, demonstrates that poorer states in India lag behind the less poor states in the implementation of development programmes, despite the fact that such programmes are conceived to offer opportunities to the poorer states to use central resources to augment their economic capacity in fighting deprivation and destitution. It also builds a model of public spending and tests the model with data using econometric methods. In addition, it applies the model to examine the question of low spending in poor states and offers concrete solutions. Using this model as a framework of analysis, governments can estimate the financial implications of structural reforms and stimulate their economies with welfare compatible allocation of resources.
The authors are thankful to the reviewer for their comments which helped them improve the quality of the paper.
India presents an exciting spectacle for the growth enthusiasts. Having 17% of the global population and barely $2,100 as the per capita income, and yet leaving a blazing trail in long-term economic growth leads many marvelling about the working of India’s society, polity, and economy. An economic scholar would mark this as a combined effect of inequality-driven high savings and investment rates and a steady propulsion spewing from a vast domestic market. They would note that high inequality coupled with low per capita income is inevitable in the transitioning phase when the economy is gradually moving from a traditional subsistence stage to a modern urban industrial one with large numbers still awaiting transformation in their lives.
The last report on poverty published by the Planning Commission in 2011–12 shows that 26.97 crore people are living below the poverty line in India. The number is staggering since this accounts for over 40% of the world’s poor. It is not just the absolute number of the poor that is important but the geographical spread of the poor which should draw the attention of the discerning minds. The observers can note that the poor are predominantly clustered in a few states—Uttar Pradesh, Bihar, Jharkhand, Chhattisgarh, Madhya Pradesh, Odisha, and Assam. These are the states where the process of the urban-industrial transition appears slow, and the toil of the poor continues in the distressed agrarian set-up. Evidently, these states need a big push if India must free itself from poverty and the tag of a low-income country.
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