Abstract

Abstract This study examines the impact of fiscal autonomy (FAP) on public expenditure performance across 18 Indian states from 2010–11 to 2019–20. We develop a measure of public expenditure performance using social indicators. We also measure FAP using revenue‐expenditure ratio. Based on system generalized method of moments, the empirical result confirms that a higher FAP given to Indian states is associated with greater fiscal performance. Further, the robustness check reveals that central transfer insignificantly affects the expenditure performance of Indian states.