CashNews.co
The size of the government, as measured by the combined government spending, averaged 27.4% of GDP, divided between GoI and states at 11.8% and 15.6% respectively during FY2012 to FY2024. In terms of the relative shares of GoI and states in the combined total expenditures, there has been a near-equality up to FY2012 after which a noticeable departure in favor of the states started showing up.
The effective expenditure by the GoI and the state governments is not total expenditure. Rather, it is primary expenditure which is total expenditure minus interest payments. Interest payments constitute transfers to the rest of the economy and do not indicate purchases of goods and services by the government. Primary expenditure, thus, reflects the available fiscal space for undertaking expenditures by the center and the states.
The shares of the GoI and the states in the combined primary expenditure remained close to each other during FY1951 to FY2011, with GoI’ share averaging 47.2% (Chart 3). This share fell to an average of 38.1% during FY2012 to FY2024. For minimizing the fall in its share in combined primary expenditure, the GoI has attempted to borrow relatively more. It has also tried to increase the non-sharable cesses and surcharges. That is why, the two shares have come relatively closer in the more recent years.