Fiscal Pressure of Migration and Horizontal Fiscal Inequality
Evidence from Indian Experience
This article examines the patterns and trends in inter‐State migration across the Indian States and observes that along with the demographic factors, migration is also affected by the fiscal profile of States. Controlling for the economic prosperity of States as reflected in their per capita Net State Domestic Product and the nature of fiscal policy stance, econometric estimation using the gravity model suggests that level of vertical federal transfers and its horizontal distribution is an important determinant of the pattern of inter State migration.
To correct for the extant horizontal fiscal inequality across the Indian States, the article suggests a relatively more progressive transfer system and a developmental fiscal policy stance at the State level to reduce the pressure of out‐migration to prosperous regions of the country.