Expenditure Composition in Indian State Governments

The study of Expenditure Composition on scientific basis helps us to understand the relative importance, quality, effects and nature of various kinds of expenditure. The study of expenditure composition at the disaggregative level would be of useful to policy makers to examine and evaluate the effects and efficiency of allocation of fiscal resources on desirable directions. Prof Shiras said that the test of public expenditure is not the aggregate expenditure, but it is the pattern of expenditure. In Democratic society, tax payers want to know whether their tax contributions are properly spent on the matters beneficial to them and also for the greater benefits of the entire community. Experts in Public finance recognized the importance of studying the behaviour of different government expenditure compositions. Given the heterogeneous character of the Indian States, it is pertinent to study the level of State Government expenditure in each state in sufficiently disaggregated form. For the present study purpose, average annual share has been used for each state with respect to the respective aggregate State Government expenditure for the years 1993-94 to 2003-04. The data compiled from Hand Book of Statistics on State Government Finances published by the Reserve Bank of India has been utilised.