An autonomous research institute under the Ministry of Finance


Sub-national Budget Credibility Institutional Perspective and Reform Agenda in India

Publication date

Jul, 2021


NIPFP Working Paper No. 338


Pratap Ranjan Jena and Abhishek Singh


The fiscal management principles enshrined in fiscal responsibility acts of states emphasize on formulating budget in a realistic manner with due regard to general economic outlook and realistic revenue prospects and minimizing deviations during a year. Failure to implement the budgets as planned may result in shifting spending priorities, exceeding deficit targets, and compromising on critical service delivery promises. This budgetary tenet assumes significance as the states have to respond to disruption in revenues, rising expenditure burdens and changes in priorities in the wake of Covid-19 pandemic and face challenges to restore fiscal consolidation process. The paper assesses the budget credibility of states in India to explain their ability to implement planned activities and respond to fiscal stress. It also focuses on strengthening institutional framework to utilize fiscal instruments optimally for better service delivery and development. 
JEL Classification: H61, H68, E62
Keywords: PEFA, Budgeting System, Multi-year Expenditure Framework, Fiscal Rules, Performance Budgeting
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