The “Scissors Effect” of COVID 19 Pandemic on State Finances: Emerging Evidence on Expenditures
Publication dateJan, 2022
DetailsNIPFP Working Paper No. 369
AuthorsMita Choudhury and Pritam Datta
The COVID pandemic imposed dual pressures on state finances. Contraction in revenues was coupled with an increased pressure to expand public spending to counter the adversities of the pandemic. Evidence from 26 states suggest that aggregate revenues fell by about 5 per cent in the pandemic year, 2020-21. Despite this fall, States have maintained a 5 per cent average growth rate of aggregate spending. Public expenditure in social sector grew at a significantly higher rate than economic services. Within social services, health expenditure in 15 selected major states grew at 16 per cent, the highest among all. This rise in health spending has however, come at the cost of expenditures in a number of other important sectors. Expenditures in education and nutrition remained nearly stagnant in the pandemic year.