An autonomous research institute under the Ministry of Finance


Public Expenditure, Governance and Human Development: A case of Madhya Pradesh

Publication date

Jul, 2016


NIPFP Working paper No. 171


N R Bhanumurthy, Manish Prasad and Richa Jain


This paper examines the link between quality of governance, public expenditure and human development outcomes in the state of Madhya Pradesh. The role of Governance is measured in dimensions: Political, Legal & Judicial, Administrative, Economic and Social. A total of 22 indicators have been used to measure the Governance Index (GI) of Madhya Pradesh at district level.  The results in this paper suggest that, at district level, development expenditure alone is not sufficient in achieving human development outcomes. However, the effectiveness of public expenditures improves with better governance indicators. In addition, GI is found to be significant and positive in improving development outcomes. Among the governance dimensions, weak administrative index appears to be the main constraint in improving the human development outcomes in less developed districts. Disaggregated analysis suggests that the districts with lower human development achievements need to prioritize only in one or two dimensions of governance, in particular administrative governance. Prioritization of various or specific dimensions of governance should help in reducing the divergences in development outcomes across the districts. The findings of this paper are very important as they suggest that public expenditure efficiency depends on the quality of governance. Hence, there is a need to equally focus, both, on improving governance as well as on increasing development expenditures.  In the context of achieving SDGs and with the lessons learnt from MDGs, the findings of the paper suggest that we should focus on policy both at the sub-national and sub-state level.

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