Previous efforts to decompose intergovernmental transfers made by the Twelfth and Thirteenth Finance Commissions into vertical and horizontal components estimate the extent of horizontal fiscal equalisation achieved through transfers at around 90%. But other channels of central transfers and spending, mostly bypassing state budgets, also have implications for regional welfare and horizontal fiscal equalisation. A comprehensive view is preferable for all central transfers and spendings having implications for regional welfare in examining vertical sharing and horizontal fiscal equalisation in India. Some methodological concerns over the decomposition of central transfers into vertical and horizontal components are addressed.

This paper is based on an extension of the data set created as a part of my doctoral thesis submitted to the Indian Institute of Management, Ahmedabad. I express sincere thanks to my thesis …