ISSN (Online) - 2349-8846

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Economist and Friend: George Rosen (1920–2018)

Unique and Precious

The writer, an economist, was on the faculty of the Indian Institute of Management Bangalore, followed by the National Institute of Public Finance and Policy in Delhi. She was a member of the Thirteenth Finance Commission, whose recommendations covered the fiscal years 2010-15 and has regularly published research papers and book reviews in this journal. Here, she writes about why she thinks the EPW is an "incredible institution."

Preserving the Incentive Properties of Statutory Grants

This paper investigates flows from the centre in respect of the two-part grant for local governments prescribed by the Thirteenth Finance Commission with unconditional and conditional components, covering 2010-15. There is evidence that fiscal compulsions at the centre bent the structure of the grant away from that envisioned by the TFC, and that its incentive properties were thereby not preserved. Local governments are the nodes at which the sustainable development goals for improved sanitation and public health have to be delivered. This is the level at which public finance attention has to be focused.

Understanding the Indian Economy

India's Evolving Economy: Puzzles and Perspectives by A Vaidyanathan (Delhi: Academic Foundation), 2014; pp 348, Rs 1,195, hardback.

Spatial Distribution of Public Services within States in India

Equitable distribution of public services with a local spatial reach poses a challenge where fiscal resource limitations permit universal coverage only as an eventual target. In a federal structure, where the allocation of local public services is devolved to subnational governments, the allocation pattern itself could vary between jurisdictions. This paper investigates the locational pattern of public service delivery points within states in India, using data from the Census Village Directory. Policy directions emerge from the empirical results.

Rural Housing Quality as an Indicator of Consumption Sustainability

An exogenously defined poverty line yields poverty headcounts between any two points in time that are a net outcome of the two-way traffic into and out of poverty. This paper argues that, for the rural Indian context, where housing is too lumpy and illiquid to be used for consumption smoothing, transitions in housing quality in cross-sectional data sets can provide revealed evidence of household perceptions of downside risk to their current consumption levels. Using the two most recent National Sample Survey housing surveys (the 58th round for 2002 and the 65th round for 2008-09), composite housing quality classifications are unbundled, and binary wall quality is selected from cross-quartile behaviour as the feature most responsive to rising household consumption levels. In both rounds, the incremental move to better quality declines beyond the consumption level at which half of all households are in better quality structures. The threshold consumption level at which this happens was lower in 2008-09 than in 2002 and reflects an improvement in housing conditions over the period. However, this effective saturation of the demand for the most basic element of better housing, much before actual saturation, provides a quantitative measure of the percentage of households even in the topmost quartile that fears downside consumption risk.

Response to Rakshit on the Finance Commission

Response to Rakshit on the Finance Commission Indira Rajaraman and 13% in the first two years, followed by 13.5% in the last three years, did not factor in the output gap in the pre-award year 2009-10.

Decentralisation, Preference Diversity and Public Spending: Health and Education in India

Education and health are commonly devolved functions to sub-national governments, even in nations which have a unitary rather than a federal structure. This paper investigates, for the specific case of a federal country like India, whether differences between states in shares of public spending on health and education show convergence over time, and the impact of episodic horizontal partitioning of states on this process. Our analysis rejects the hypothesis that preferences for health across state level jurisdictions are becoming more uniform over time, but for education, there is evidence of convergence, albeit at a low rate.

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