The analysis comes against the backdrop of capex push by the Centre and States.
- It has constructed a Quality of Public Expenditure (QPE) index to empirically examine the association between quality of public spending and socio-economic outcomes.
- QPI includes factors such as capital outlay to GDP ratio, revenue expenditure to capital outlay ratio, development expenditure to GDP ratio, interest payments to total expenditure ratio etc.
Key Findings
- It has categorised India’s public expenditure trajectory since 1991 into six distinct phases:-
- 1991-95 (Post-Liberalisation Phase): Witnessed fiscal consolidation at the cost of capital and developmental spending.
- 1996-2003 (Pre-FRBM Years): Rising debt burdens and stagnant public investment
- 2003-08 (FRBM Implementation): Rules-based fiscal discipline improved capital outlays and led to reduced interest payments.
- 2008-13 (Global Financial Crisis): Countercyclical measures strained fiscal stability while supporting economic recovery.
- 2013-20 (GST & Fiscal Devolution): Transitioning to GST and higher fiscal devolution reshaped expenditure priorities.
- 2020-25 (Pandemic Response): Infrastructure-led recovery drove capital expenditure despite elevated borrowing.
- Higher expenditure quality aligns with stronger economic performance and improved social outcomes.
- While the Centre's expenditure quality is more strongly associated with GDP growth, States’ expenditure quality has a greater impact on the human development index (HDI).
Role of Public Expenditure
Risks of High Public Expenditure
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