Partisan Politics and Intergovernmental Transfers in India Stuti Khemani




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Table 1

Intergovernmental Transfers in India





Type

Decision-making Authority for Distribution Criteria

Share in Total Central Transfersa


Statutory Revenue Transfers

(Tax sharing + grants)


General purpose

Statutory body appointed every 5 years

64%

(of grants)



Plan Transfers

(Ratio of grants to loans instituted to be approximately 30:70 )

General purpose

National council chaired by the prime minister, and including central cabinet ministers and state chief ministers


15%

(of grants)

51%

(of central loans)




Central Schemes

(No fixed ratio of grants to loans)

Specific purpose




Individual central ministries

16%

(of grants)

8%

(of central loans)



a. Numbers are the sample average for 15 major states over the period 1972-1995. The transfer numbers do not add up to 100% because some central grants and loans are non-systematic, for emergency and miscellaneous purposes. A significant portion (31%) of loans to a state classified as coming from the center are from small savings originating in the state.



Table 2

Summary Statisticsa


Variable

No. of Obs.

Mean

Std. Dev.

Finance Commission Transfers



352

173.32

64.80

Planning Commission Grants



351

45.85

45.65

Planning Commission Loans



345

80.72

74.18

Grants for Central Schemes



351

46.04

27.10

Loans for Central Schemes



345

4.88

8.39

Real state domestic product



360

4803.73

1807.98

Total population (in thousands)



360

47396.79

28163.28

Political affiliation

(=1 if center and state govt. belong to same political party)


360


0.62


0.49


Affiliation * Proportion of seats held by representatives of the national ruling partyb



360

0.47

0.41

(1- Affiliation) * Proportion of seats held by the representatives of the national ruling party



360

0.15

0.27

Coalition government

(=1 if state executive consists of a coalition govt.)


360

0.16

0.37

State election year

(=1 in the year preceding a state election)


360

0.21

0.41

  1. Fiscal variables and state domestic product are in per capita 1992 rupees

  2. Proportion of the total seats allotted to the state in the national legislature




Table 3

Economic/Formula Determinants of Intergovernmental Transfers

(t-statistic in parenthesis)



Variable

Statutory Transfers

Plan Grants

Total Plan Transfers

(Loans + Grants)

Real state income per capita



-0.02

(-10.36)


-0.004

(-1.16)


-0.01

(-4.62)


-0.01

(2.14)


0.003

(0.64)


0.01

(1.51)


Total population



-0.0002

(-2.79)


0.0005

(1.29)


-0.0004

(-3.65)


-0.001

(-1.19)


-0.001

(-4.76)


-0.002

(-1.58)


Year Effects



Yes

Yes

Yes

Yes

Yes

Yes

State fixed effects



No

Yes

No

Yes

No

Yes



N=352


Rsq=0.68



N=352

Rsq=0.81


N=351


Rsq=0.31



N=351

Rsq=0.63


N=345

Rsq=0.31


N=345

Rsq=0.61


Note: OLS regressions with robust standard errors; Dependent variables and state income are in per capita 1992 rupees.


Table 4

Effect of Partisan Politics on Intergovernmental Transfers

(t-statistic in parenthesis)



Variable

Total Plan Transfers

Statutory Transfers


Political affiliation

(=1 if center and state govts. belong to the same political party)


64.74

(2.51)


-41.84

(-3.69)


Affiliation * Proportion of seats controlled by national ruling party



-103.25

(-3.21)


25.66

(2.23)


(1- Affiliation) * Proportion of seats controlled by national ruling party



-40.88

(-2.39)


-11.32

(-1.03)


Real state income per capita

0.01

(1.65)


-0.003

(-0.94)


Total population

-0.002

(-2.02)


0.00004

(0.10)


F-statistic for H0: effect of seats is equal for affiliated and non-affiliated states



3.80

(p-value = 0.05)



5.84

(p-value = 0.02)





N = 345

R-sq = 0.65



N = 352

R-sq = 0.82



Note: State fixed effects and year effects included; OLS regressions with robust standard errors; Dependent variables and state income are in per capita 1992 rupees
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