Open Access
Subscription Access
Effects of Tax Revenue and Capital Expenditure on Economic Growth : A Case Study of the Union Territory of Puducherry, India
Subscribe/Renew Journal
The growth effects of the government’s own tax revenue and capital expenditure were estimated for the Union Territory of Puducherry using the ordinary least squares multivariate regression model for 2005–2018. The results suggested that both government’s own tax revenue and capital expenditure had significant positive effects on the economic growth of the Union Territory. For example, one unit increase in capital expenditure could boost economic growth (NSDP) by 13%. Similarly, one unit change in the government’s own tax revenue collection could potentially change the NSDP of the Union Territory by 30%. Therefore, the Puducherry government can focus on increasing its capital expenditure to enhance its economic growth. Similarly, it can increase its own tax revenue (the taxes under its jurisdiction) by broadening its tax base. These may help the government boost its growth and thus correct its internal fiscal imbalance.
Keywords
Government’s Own Tax Revenue, Capital Expenditure, Economic Growth, NSDP, Puducherry.
JEL Classification Codes : H21, H72, O47
Paper Submission Date : May 26, 2022 ; Paper sent back for Revision : February 14, 2022 ; Paper Acceptance Date : April 15, 2022
User
Subscription
Login to verify subscription
Font Size
Information
- Alexiou, C. (2009). Government spending and economic growth: Econometric evidence from the South Eastern Europe (SEE). Journal of Economic and Social Research, 11(1), 1–16.
- Ali, S., Ahmad, N., & Khalid, M. (2010). The effects of fiscal policy on economic growth: Empirical evidence based on time series data from Pakistan [with comments]. The Pakistan Development Review, 49(4), 497–512. https://www.jstor.org/stable/41428671
- Al-Sharif, B., & Bino, A. (2019). The role of government capital expenditures in economic growth in Jordan. International Journal of Business and Economics Research, 8(2), 69–77. http://doi.org/10.11648/j.ijber.20190802.15
- Arnold, J. M. (2008). Do tax structures affect aggregate economic growth? Empirical evidence from a panel of OECD countries. OECD Economics Department Working Papers, No. 643. OECD Publishing. https://doi.org/10.1787/236001777843
- Barro, R. J., & Redlick, C. J. (2011). Macroeconomic effects from government purchases and taxes. The Quarterly Journal of Economics, 126(1), 51–102. https://doi.org/10.1093/qje/qjq002
- Bleaney, M., Gemmell, N., & Kneller, R. (2001). Testing the endogenous growth model: Public expenditure, taxation, and growth over the long run. Canadian Journal of Economics/Revue canadienne d'économique, 34(1), 36–57. https://doi.org/10.1111/0008-4085.00061
- Brasoveanu, L. O. and Brasoveanu, I. (2008). The correlation between fiscal policy and economic growth. Theoretical and Applied Economics, 7(524), 19–26. http://store.ectap.ro/articole/317.pdf
- Comptroller and Auditor General. (2013). Report of the Comptroller and Auditor General of India on Union Territory finances for the year ended March 2013. CAG, Government of India.
- Comptroller and Auditor General. (2016). Report of the Comptroller and Auditor General of India on Union Territory finances for the year ended March 2016. CAG, Government of India.
- Comptroller and Auditor General. (2017). Report of the Comptroller and Auditor General of India on Union Territory finances for the year ended March 2017. CAG, Government of India.
- Comptroller and Auditor General. (2021). Report of the Comptroller and Auditor General of India on Union Territory finances for the year ended March 2021. CAG, Government of India.
- Dahlby, B., & Ferede, E. (2012). The effects of tax rate changes on tax bases and the marginal cost of public funds for Canadian provincial governments. International Tax and Public Finance, 19, 844–883. https://doi.org/10.1007/s10797-012-9210-7
- Devarajan, S., Swaroop, V., & Zou, H.-F. (1996). The composition of public expenditure and economic growth. Journal of Monetary Economics, 37(2), 313–344. https://doi.org/10.1016/S0304-3932(96)90039-2
- Easterly, W., & Rebelo, S. (1993). Fiscal policy and economic growth an empirical investigation. Journal of Monetary Economics, 32(3), 417–458. https://doi.org/10.1016/0304-3932(93)90025-B
- Engen, E. M., & Skinner, J. (1996). Taxation and economic growth. National Tax Journal, 49(4), 617 – 642.
- Fölster, S., & Henrekson, M. (2001). Growth effects of government expenditure and taxation in rich countries. European Economic Review, 45(8), 1501–1520. https://doi.org/10.1016/S0014-2921(00)00083-0
- Gale, W. G, & Samwick, A. A. (2014). Effects of income tax changes on economic growth. Available at SSRN. https://ssrn.com/abstract=2494468
- Gemmell, N., Kneller, R., & Sanz, I. (2011). The timing and persistence of fiscal policy impacts on growth: Evidence from OECD countries. The Economic Journal, 121(550), F33–F58. https://doi.org/10.1111/j.1468-0297.2010.02414.x
- George, R., & Reddy, Y. V. (2015). Corporate taxes in Goa: An analysis. Arthshastra Indian Journal of Economics & Research, 4(2), 47–55. https://doi.org/10.17010/aijer/2015/v4i2/65547
- Gujarati, D. N., Porter, D. C., & Gunasekar, S. (2012). Basic econometrics. Tata McGraw-hill Education.
- Harrod, R. F. (1939). An essay in dynamic theory. The Economic Journal, 49(193), 14–33. https://doi.org/10.2307/2225181
- Harrod, R. F. (1948). Towards a dynamic economics: Some recent developments of economic theory and their application to policy. MacMillan and Company.
- Harrod, R. F. (1964). Are monetary and fiscal policies enough? The Economic Journal, 74(296), 903–915. https://doi.org/10.2307/2228849
- International Monetary Fund. (1994). IMF policy paper, fiscal policy and long-term growth. IMF, 1–26.
- International Monetary Fund. (2015). IMF policy paper, fiscal policy and long-term growth. IMF, p.6.
- Karmenivannan, P. (2016). Weekend tourism – A case study of Puducherry (Doctoral dissertation). http://dspace.pondiuni.edu.in/jspui/bitstream/1/2442/1/T6185.pdf
- Kneller, R., Bleaney, M. F., & Gemmell, N. (1999). Fiscal policy and growth: Evidence from OECD countries. Journal of Public Economics, 74(2), 171–190. https://doi.org/10.1016/S0047-2727(99)00022-5
- Krugman, P. (1988). Financing vs. forgiving a debt overhang. Journal of Development Economics, 29(3), 253–268. https://doi.org/10.1016/0304-3878(88)90044-2s
- McNabb, K. (2018). Tax structures and economic growth: New evidence from the government revenue dataset. Journal of International Development, 30(2), 173–205. https://doi.org/10.1002/jid.3345
- Mukherjee, S. (2020). Performance assessment of Indian GST: State-level analysis of compliance gap and revenue growth (NIPFP Working Papers 301). National Institute of Public Finance and Policy.
- Mullen, J. K., & Williams, M. (1994). Marginal tax rates and state economic growth. Regional Science and Urban Economics, 24(6), 687–705. https://doi.org/10.1016/0166-0462(94)90007-8
- Nayar, K. (2018). Tourism sector in India: A case study of Goa. Genius, VI(I), 129–132.
- Nayyar, A., & Singh, I. (2018). A comprehensive analysis of Goods and Services Tax (GST) in India. Indian Journal of Finance, 12(2), 57–71. https://doi.org/10.17010/ijf/2018/v12i2/121377
- Okoro, A. S. (2013). Government spending and economic growth in Nigeria (1980–2011). Global Journal of Management and Business Research,13(5), https://journalofbusiness.org/index.php/GJMBR/article/view/1031/942
- Onifade, S. T., Çevik, S., Erdoğan, S., Asongu, S., & Bekun, F. V. (2020). An empirical retrospect of the impacts of government expenditures on economic growth: New evidence from the Nigerian economy. Journal of Economic Structures, 9, Article 6, 1–13. https://doi.org/10.1186/s40008-020-0186-7
- Oteng-Abayie, E. F. (2011). Government expenditure and economic growth in five ECOWAS countries: A panel econometric estimation. Journal of Economic Theory, 5(1), 11–14. http://doi.org/10.3923/jeth.2011.11.14
- Peprah, P. A., Hongxing, Y., & Pea-Assounga, J. B. (2019). Regional foreign direct investment potential in selected African countries. International Journal of Economics and Finance, 11(10), 66–76. https://doi.org/10.5539/ijef.v11n10p66
- Ram, R. (1986). Government size and economic growth: A new framework and some evidence from cross-section and time-series data. The American Economic Review, 76(1), 191–203. http://www.jstor.org/stable/1804136
- Roșoiu, I. (2015). The impact of the current and capital expenditures on the economic growth in Romania. In, Int'l Conference on Business, Marketing & Information System Management (BMISM'15). http://icehm.org/upload/6763ED1115049.pdf
- Samuel, U. E., Prince, A. I., John, I. U., & Nneka, I. R. (2018). Effect of administrative capital expenditure on economic development: An emerging nation outlook. Journal of Internet Banking and Commerce, 23(1), 1–15.
Abstract Views: 448
PDF Views: 0