Growth and Determinants of Non-Tax Revenue of Indian States: A Panel Data Study

In the study of state finances, non-tax revenue has so far been the neglected area. This paper attempts to examine the performance of non-tax revenue of Indian states. It estimates the growth of non-tax revenue of 16 major Indian states over a period of 18 years. It examines the determinants of non-tax revenue using panel data analysis with Fixed Effect Model (FEM). Based on the hypothesis that it is the socioeconomic activities of the states that provide the base for raising revenue, the paper analyzes how the economic development of the states determines the performance of their own non-tax revenue. It concludes that the difference in socioeconomic activities of individual states significantly influences the generation of non-tax revenue of the state, as the state-specific intercepts are found to be statistically significant for each state.