Abstract
AbstractThis article examines the patterns and trends in inter‐State migration across the Indian States and observes that along with the demographic factors, migration is also affected by the fiscal profile of States. Controlling for the economic prosperity of States as reflected in their per capita Net State Domestic Product and the nature of fiscal policy stance, econometric estimation using the gravity model suggests that level of vertical federal transfers and its horizontal distribution is an important determinant of the pattern of inter State migration. To correct for the extant horizontal fiscal inequality across the Indian States, the article suggests a relatively more progressive transfer system and a developmental fiscal policy stance at the State level to reduce the pressure of out‐migration to prosperous regions of the country.
Highlights
In federal countries, migration is a common feature
Migration of people from low-income regions to the more prosperous regions of the country is a common feature of Indian federation too
The objective of fiscal transfers is to address the issue of fiscal inequality arising due to the differences in fiscal capacity
Summary
Migration is a common feature. Migration of people from low-income regions to the more prosperous regions of the country is a common feature of Indian federation too. While determining inter-se share of federal taxes to provinces in India, the basic aim has been to correct differentials in revenue-raising capacity and cost disability factors across provinces (Rao and Singh 2003; Kumar and Managi 2009; Chakraborty 2003) To achieve these goals, different Finance Commissions have followed principles of equity and efficiency. Shaw (1986) in a comparative study pre-1971 and post-1971 using data on Canada’s 17 Census Metropolitan Areas found that the influence of traditional market variables (wage, employment, and changes in business cycle) diminished over time, and that fiscal variables like unemployed insurance, federal government equalization and related transfers to provinces, and natural resource revenues have had unintended consequences in influencing migration. For the overall population we see a decline in migration due to marriages from 52 per cent in 1981 to 32per cent in 2001, and an increase in migration due to employment from 10% in 1981 to 24 per cent in 2001 (Sekhar 1982; Padamanabha 1988; Vijayanunni; Registrar General and Census Commissioner 2001)
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