Fiscal Reforms, Fiscal Rule and Development Spending: How Indian States have Performed?

In this paper it is examined whether a favourable fiscal rule had impact on fiscal balance but what lies behind a particular outcome in a rule based fiscal regime. Often time it is argued that fiscal targets in a rule based fiscal control regime is achieved through a cut in development and maintenance expenditure. The twin objectives of this paper are to examine the impact of fiscal rule on fiscal balance and on the path of fiscal adjustment, particularly the development spending. The focus of this study is 14 major states in India. The period of study is from 2000-01 to 2009-10. [NIPFP Working Paper No. 2013-122].