The Rhetoric of Fiscal Performance: A Study of Odisha, India

Abstract

This paper re-examines the fiscal performance of Odisha using receipt and expenditure side indicators. Low dormant own tax capacity, inappropriate expenditure management and meager political competition within the state are important reasons for persistent weak fiscal performance. The incomprehensiveness and operational issues of tax, prioritization for larger size of federal transfers and moderate political competition within the state pushed towards low tax capacity. Lack of strategic prioritization and operational inefficiency of public expenditure have led to inappropriate expenditure management. The state has to (i) administer its tax efficiently; (ii) manage public expenditure economically, efficiently and effectively through increasing the elasticity of developmental expenditures of GSDP and GSDP of own tax; and (iii) strategically prioritize the expenditure through decreasing the elasticity of own tax of non-developmental expenditure. The Centre may introduce an independent, impartial and semi-judicial body to equitably distribute central transfer across the state which, in turn, help the fiscal improvement of states.