Efficiency Analysis and Macroeconomic Determinants of Non-tax Revenues: Evidence from Special Category States of India

Abstract

This article investigates the non-tax revenue performance of India’s special category states (SCS), throwing light on critical parameters such as revenue expenditure recovery rates, volatility and macroeconomic determinants. The data show considerable differences amongst states, with Assam, Jammu and Kashmir, Himachal Pradesh, Uttarakhand and Sikkim displaying greater revenue expenditure recovery rates, favourably affecting their composite non-tax revenue performance. States with lower recovery rates on revenue expenditures, on the other hand, score poorly in the composite non-tax revenue index. Furthermore, the analysis reveals that states with low volatility in non-tax revenue collections, such as Himachal Pradesh, Manipur, Mizoram, Sikkim and Tripura, have a more steady development trajectory for non-tax revenue and a beneficial effect on composite non-tax revenue performance. States with higher volatility, such as Arunachal Pradesh, Assam, Jammu and Kashmir, Meghalaya, Nagaland and Uttarakhand, might have trouble keeping up with constant development, negatively affecting their composite non-tax revenue performance. The impact of macroeconomic determinants on non-tax revenue mobilisation has been estimated through a fixed-effects model, where the analysis revealed that outstanding debt, level of infrastructure and implementation of Goods and Services Tax had a positive impact on the non-tax revenue mobilisation among SCS.

JEL Codes: H21, H71, H23 and H27

Keywords

Goods and Services Tax non-tax revenues revenue performance special category states

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