Finances of Gram Panchayats in West Bengal: Disparities and Determinants

Abstract

Acknowledging the importance of fiscal decentralisation, this paper evaluates the fiscal performances of all the Gram Panchayats (GPs) in Birbhum and North 24 Parganas of West Bengal and identifies the determinants of disparities in their fiscal performances. Our analysis reveals that smaller GPs generate greater own source revenues per person, receive higher grants per person and spend more per person. Several factors including demographic characteristics, socio-economic characteristics and geographical locations shape the needs and priorities of the GPs and, therefore, are important for explaining the variations in their fiscal performances. The regression results reveal that willingness to pay taxes is greater among literate people and also the incidence of expenditure is significantly higher for GPs with higher literacy rates. The proportion of agricultural labour and concentration of scheduled caste/scheduled tribes population in the GPs show a negative impact on the collection of own source revenue and also on per capita expenditure but a positive impact on the grants and transfers received from higher levels of governments.