Paper Title
Fiscal Equalization Transfers Based on Spending Needs of State Governments in India

Abstract
This study addresses an important policy issue pertaining to determination of equalization transfers to Indian States. It empirically estimates the effect of transfers on expenditures of 29 Indian States using the panel data methodology during 2005-06 to 2018-19. It also determines the transfers based on the spending needs States. Results indicate a strong crowding-in effect of transfers on public spending of States and the presence of fly paper effect. Amounts of equalization transfers determined for all 29 States were ₹. 20,053 billion as per top average benchmark and ₹.7,789 billion as per average benchmark. We hope that these results will be useful to policymakers and other stakeholders to take appropriate strategies to design fiscal transfer policy such that all citizens can avail a standard level of public services in India. Keywords - Fiscal Transfers, Fiscal Equalization, Expenditure Needs, Indian States, Panel Data Methods. JEL Classification - H77, H73, H72, C23.