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Fiscal Transfers based on Inputs or Outcomes? Lessons from the Twelfth and Thirteenth Finance Commission in India

Victoria Y. Fan, Smriti Iyer, Avani Kapur, Rifaiyat Mahbub , Anit Mukherjee

There is limited empirical evidence about the efficacy of fiscal transfers for a specific purpose, including for health which represents an important source of funds for the delivery of public services especially in large populous countries such as India. The objective of this paper is to examine two distinct methodologies for allocating specific‐purpose centre‐to‐state transfers, one using an input‐based formula focused on equity and the other using an outcome‐based formula focused on performance.

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