Abstract

The social sector expenditure is important in promoting human development, welfare and inclusive growth especially in a federal system like India where the delivery of social services is largely the responsibility of the states. We analyse the effect of social sector expenditure on per capita GSDP, Own Tax Revenue, Fiscal Deficit, Debt and Intergovernmental Grants using 315 observations from 15 large states between 2005 and 2025. The results indicate that Intergovernmental Grants and Fiscal Deficit have significant and positive impact on Social Sector Spending at 1 percent and 5 percent level of significance and the value of correlation coefficients are 0.494 and 0.591 respectively. However, variables of economic capacity such as GSDP, Own Tax Revenue and Debt show relatively modest relationships. Multiple regression shows a R 2 of 0.626, which means that the selected variables explain 62.6 percent of the variation in spending. The F-statistic (103.378) indicates that the model is overall significant. The results point to the role of fiscal transfers and state fiscal conditions as determinants of social expenditure preferences.