The Effect of Fiscal Decentralisation on the Expenditure of Urban Local Bodies: An Econometric Evidence from Mangalore City Corporation-India
Vincent Vinod Dsouza
Fiscal decentralisation refers to the enactment of laws to empower local bodies to collect their own taxes, embark on expenditure and investment activities among others independent of the central or state government. Thus given the enormous challenges such as inadequate infrastructure, unemployment, poverty among others that confront central governments as well local bodies, fiscal decentralisation is advocated to empower local bodies financially to be able to take initiatives to solve most of the challenges at the local level and therefore taking some burden from the central government. Given this backdrop, several countries including India have adopted fiscal decentralisation at varying degrees. This study therefore used time series data from 1987-2015 as well as the OLS econometric regression technique while testing for heteroskedasticity using the Breusch-Pagan / Cook-Weisberg test to investigate the effect of fiscal decentralisation on the expenditure or payments of Mangalore City Corporation in India. The study found fiscal decentralisation to have statistically positive significant effect on payments, capital payments and total expenditure of Mangalore City Corporation. Further, gross domestic income was revealed to have positive significant effects on payments and capital payments of Mangalore City Corporation. Thus, factors that enhance fiscal decentralisation and economic growth need to be instituted by policy makers in India in order to boost expenditure towards curbing the various challenges that confront Local Urban Bodies (ULBs).