Exploring the Dynamics between Government Revenue and Expenditure of Subnational Governments: The Case of Assam in Northeast India

The tools of government expenditure and government revenue are crucial for budgetary policy and play an important role in the development of any economy.Policy makers' attention has been drawn to the question of possible connections between government revenue and expenditure in the area of public finance.The demand for government investments is always growing, particularly in emerging nations, yet the low per capita income of these nations makes it difficult for the government to get large amounts of money through tax collection.Therefore, it is necessary to understand the relationship between government revenue and spending, which is also a precondition for successful fiscal consolidation.In this paper, an attempt has been made to study the relationship between government expenditure and revenue in the case of Assam economy for the time period 1980-1981 to 2022-2023.Long-term association and causal pattern between the two variables are tested using the Johansen cointegration test and Granger causality analysis.The results show the existence of bidirectional causality between government revenue and expenditure, implying long-term fiscal synchronization in the state of Assam.