Tuesday, November 5

A Study of the Fiscal Marksmanship of Capital Expenditure Among Indian State Governments

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Abstract 

Fiscal marksmanship examines the degree of correspondence between budgeted projections of revenue and expenditure, and actual receipts and spending. Assessing budget credibility through fiscal marksmanship analysis is critical in light of the COVID-19 pandemic, which has affected the revenue-raising capacity of states. This paper aims to comprehensively analyse and understand sub-national fiscal marksmanship, with a particular focus on capital expenditure in the social sector. It covers the period of 2010-2018, and looks at marksmanship ratios and forecast errors across those years for 15 major states, selected based on the magnitude of their capital expenditures. It also carries out an assessment using the Public Expenditure and Financial Accountability (PEFA) framework, and ranks states accordingly. Further, it attempts to understand the sources of the forecast errors, using Theil’s coefficient and by partitioning the errors, to ascertain whether the observed errors in the budget can be improved upon or not. It finally makes an attempt to contextualise and understand some of the causes behind the observed trends in sub-national fiscal marksmanship.

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