State Level Expenditure Management Policy in India: An Empirical Analysis of Odisha State Finance

This study makes an empirical analysis on state finance in India with a special reference to the State of Odisha. Thekey deficit indicators of state have declined significantly, since 2002–03. Bringing down the revenue expenditure without adversely affecting capital expenditure, implementation of fiscal rules in the state and effective liquidity management policy are the key for sound state financial position since 2002–03. The long run elasticity of capital outlay on growth of the gross state domestic product is estimated by employing Vector Error Correction Mechanism in order to provide a policy direction for further reforms in the state finance. This study suggests more capital outlay and capital expenditure through Public Private Partnership (PPP) to further induce growth which will help in more revenue mobilization.