Convergence Analysis of Social Sector Expenditure and its Components: Evidence from the Indian States

Abstract

ABSTRACT This paper examines the convergence of public expenditure and its major components using sub-national data from India. By employing the panel club convergence test, the paper finds convergence in per capita public expenditure across Indian states implying that distribution policies of public expenditure are effective and fair across the states. Subsequently, the convergence of per capita total social sector expenditure and its major components are studied. The results support the evidence of convergence for total social sector expenditures and in the case of its components, we find that six of the nine components display regional convergence. Three components, namely, per capita education, sports, art and culture expenditure; per capita social security and welfare expenditure; and per capita rural development expenditure display the evidence of divergence and the presence of multiple transition paths. From the policy perspective, these three components of social expenditures need greater attention by the state governments as these expenditures are important for social cohesion, sustainable development, and achieving millennium development goals.