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Compensation for Environmental Services and Intergovernmental Fiscal Transfers in India

19 Pages Posted: 21 Sep 2008 Last revised: 15 Jul 2009

Shunsuke Managi

Kyushu University

Surender Kumar

University of Delhi - Department of Business Economics

Date Written: September 19, 2008

Abstract

The paper analyzes the role of intergovernmental fiscal transfers in achieving environmental sustainability. Generally, genesis of environmental degradation can be found in the incentive structure of governance in India. About 35 percent of total grants-in-aid recommended by the 12th Finance Commission are used for the provision of environmental services and are predominantly given for developing end-of-pipe infrastructure. Earmarked grants are better suited for environmental clean-up activities. Lump-sum transfers based on a predefined formula are good candidates for precautionary activities. Financial acknowledgements of the environmental services provide incentives for enhancing environmental services. The inclusion of environmental services in the allocation of fiscal transfers would also help in reducing poverty and regional disparities.

Keywords: Environmental services, Fiscal federalism, spatial externalities, environmental expenditure, India

JEL Classification: H77, Q01

Suggested Citation

Managi, Shunsuke and Kumar, Surender, Compensation for Environmental Services and Intergovernmental Fiscal Transfers in India (September 19, 2008). Available at SSRN: https://ssrn.com/abstract=1233184 or http://dx.doi.org/10.2139/ssrn.1233184

Shunsuke Managi

Kyushu University ( email )

Fukuoka, Fukuoka
Japan

HOME PAGE: http://www.managi-lab.com/english.html

Surender Kumar (Contact Author)

University of Delhi - Department of Business Economics ( email )

New Dehli
India

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