Fiscal Performance and Human Development across Indian States: A Panel Data Analysis.
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Abstract
Rising human development alongside uneven fiscal trajectories reveals a more complex development story across Indian states. Using a balanced panel of 24 states over 1995-2020, human development improved steadily from 0.488 to 0.670, while fiscal performance fluctuated and remained widely dispersed, with CFPI ranges still exceeding 20 points in later years. Despite higher fiscal scores in special category states, their human development advantage remained statistically insignificant. Correlation weakened over time, reaching nearly zero (0.013) by 2020 and two-way fixed-effects estimates showed no significant within-state impact of fiscal performance on human development. The findings indicate that outcomes depend more on expenditure quality, institutional effectiveness and long-term social investment than on aggregate fiscal strength alone.
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