Oil Revenues and Economic Development: The Case of Rajasthan, India

In 2004 a large discovery of oil was made in Rajasthan, a relatively poor state in north-west India. Oil began to flow in 2009. The estimated total hydrocarbons resource base in Rajasthan is 6.5 billion barrels, and the fields are estimated to have the potential to reach output levels of over 200,000 barrels of oil per day. The quantities of oil that are expected to be produced, and their resulting revenues, are significant, but unlikely to be transformative to the state’s finances. However, given low levels of economic and human development, effectively-spent resource revenues could have a significant impact on the welfare of Rajasthan’s citizens.  This paper discusses options for the use and management of oil revenues in Rajasthan, picking up the challenge from the point at which revenues start to flow to the government. The receipt and expenditure of oil revenues are matters for fiscal policy, and we consider them in the context of India’s federal system, where fiscal responsibility is divided between the federal government and state governments. Drawing on international experience, we discuss how resource revenues are spent in practice, and how they might better be used to benefit the citizens who ultimately own them.

By: Paul Segal , Anupama Sen

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