An empirical examination of government spending on social sector in Punjab and its Adjoining States

Social sector being a prominent constituent of states’ revenue expenditure plays an important role for the development of the states. Keeping in mind the noteworthiness of social sector expenditure, the present empirical investigation envisages to examine the growth, composition and causal linkages of social sector expenditure and gross state domestic product (GSDP) in Punjab (PNB) and its adjoining states, namely Haryana (HAR), Himachal Pradesh (HMP) and Jammu and Kashmir. Being an empirical investigation, the study is based on secondary time series data for a period of 30 years (i.e. 1985–1986 to 2014–2015), on social services and its important sub-components, compiled from various RBI bulletins, State Government Finances-A Study of State Budgets and MOSPI. Data have been analysed by employing required statistical and econometric techniques such as compound annual growth rates, two-way analysis of variances approach, augmented Dickey-Fuller test and Grangers’ causality test. Distributive shares of states in social sector expenditure and its sub-components have also been worked out. As per the findings, significant differentials have been found in social sector spending to GSDP among states under study. Unidirectional causality has been found from GSDP to social sector expenditure for PNB, HAR and HMP. As far as the growth and relative share is concerned, PNB state has shown a dismal picture as its share is found to be meagre and declining as compared with its adjoining states.