Impact of Intergovernmental Fiscal Transfers on Gender Equality in India: An Empirical Analysis

Abstract

Intergovernmental fiscal transfers (IGFT) are, in theory, neither good nor bad for tackling gender inequalities. Fiscal federalism with asymmetry in revenue and expenditure assignments inevitably leads to vertical and horizontal imbalances in public service provisioning. Because the states of India have different capacities for raising taxes and for funding public expenditure, intergovernmental transfers can play a role in equalization of fiscal capacities. Do higher per capita fiscal transfers help in reducing gender inequalities across states in India? Using data from the Finance Accounts of various states, we analyse the impact of fiscal transfers – both conditional and unconditional fiscal transfers – on the gender parity index in education, using panel data models. We find that unconditional transfers have a significant and positive impact on gender parity outcomes in the education sector at the primary and secondary levels, in contrast to tied transfers. The models also control for gender budgeting initiatives across states and find that gender budgeting has a beneficial effect on education equality. The policy implication of these results for the recently constituted Fifteenth Finance Commission in India is to strengthen the “gender equality” criteria in intergovernmental transfers in India.

Keywords: intergovernmental fiscal transfers (IGFT), gender equality

JEL Classification: H00, I3, J16