Search for Resources in a High Income State: A Study of State Finances of Sikkim

The paper examines the public financial management (PFM) of Sikkim focusing mainly on resources generation effort and budget management practices. We note that any deviation from the Central transfers creates fiscal stress as the State depends heavily on them to fund vast expanse of social and economic services and infrastructure. The sparse internal resources reduce flexibility to invest in the sectors where the State has inherent advantages. The search for resources to drive the development needs and create higher employment opportunities remain a major drag for the State. The paper looks at the possibilities of strengthening internal resources and improving the efficiency of public spending to ensure value for money. The fiscal stress faced by the State due to decline in Central assistance to the State plan should be considered as an opportunity to make an unbiased assessment of its fiscal capacity and development commitment.