Decomposition of Real Net State Domestic Product (NSDP) of Manipur and Its Implication on Fiscal Deficit

Any non-stationary time series are usually decomposed into permanent (secular/trend) and cyclical (temporary/transitory) components for clearer economic interpretations. The purpose of this paper is to decompose the real NSDP of Manipur using the Beveridge and Nelson methodology and illustrate its usefulness for examining cyclical and secular movement. Further, this paper examines the government expenditures and revenues in order to access the extent to which the sharp increase in the fiscal deficit should be viewed as cyclical rather than secular phenomenon. It is obseved that there is persistent rise in government spending and a sizable portion of this increase in fiscal deficit appears to be structural in nature.