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In Sikkim,per
capita grants (including plan and non-plan grants) have been
a substantial 60 per cent of per capita income since 1989-90
(chart 2.10). Inflows of grants from the centre have been
financing nearly 50 per cent of state government expenditure.
Although the share has been fluctuating,there is no clear
sign of a decline. Transfers from the Centre are exogenous
injection of resources into the states economy. A part of
such transfers pays the wages and salaries of government
employees, while the rest goes into government consumption
and investment. Either way, the inflow of grants directly
generates incomes and expands the size of the market. Normally
a rupee spent by the government should lead to many rupees
worth of income being generated in the state. The chain of
income generation that results in additional income generation
of a multiple of the additional government expenditure is
known as the multiplier effect.
The ratio of
total government expenditure (revenues expenditure and capital
outlay) to GSDP was as high as 82.4 per cent in 1995-96,
which implies an average multiplier of only 1.21. Normally
high expenditure should lead to a much higher level of income.
The low value of the average multiplier or the "missing multiplier"
could either be a result of a large proportion of government
expenditure on goods and services produced outside the state,
which would fail to trigger off a chain of income generation
within the estate, or the result of beneficiaries parking
their funds outside the state. It could also point to the
possibility
of gaps in expenditure management and leakages.
Source:Annual Financial Statements (budget) 2000-2001,Government
of Sikkim |