ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Issues and Determinants

Horizontal Imbalances in India

Horizontal imbalances (measured by the coefficient of variation in own revenue as a percentage of total expenditure) persist in India even today mainly due to a host of economic and political factors. Variations in tax base, tax effort, infrastructural facilities - both physical and social - and political uncertainty are found to be the important determinants of horizontal imbalances. The dispersion in horizontal imbalance can only be reduced through all-round development of the poorer states. General-purpose transfers from the centre are essential for horizontal equity but they cannot ensure a permanent solution.

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