Effects of Tax Revenue and Capital Expenditure on Economic Growth : A Case Study of the Union Territory of Puducherry, India

This study estimates the significance of Government’s Own Tax Revenue and Capital Expenditure on the economic growth of the Union Territory of Puducherry, India. The Ordinary Least Squares multivariate regression model has been used to estimate the same. The results suggest that both government’s own tax revenue and the capital expenditure have significant positive effects on the economic growth of the Union Territory of Puducherry. The government’s own tax revenue has the coefficient of 0.30 at 5% significance level and the coefficient of the capital expenditure is 0.13 at 10% significance level. Therefore, government can focus on extending the tax coverage, like developing more tourism spots at the coastal places, providing modern facilities to tourists like night life, casinos, discos, GST registration for enterprises and the like which is in line with the tourism of the state of Goa. Government can also focus on capital expenditure through various undertakings in the form of public and private partnerships. In the long run this could help the government to correct its internal fiscal imbalance