In 2015-16, the Centre accepted the 14th Finance Commission's (FFCs) recommendation and the share of states in central taxes was increased by 10 percentage points to 42 per cent from a level of 32 per cent.
The paper said there were doubts that the states might curtail their social sector expenditure in response to increased untied transfers from the Centre.
"Contrary to this, there has been an increase in social sector expenditure as a percentage of gross state domestic product (GSDP) for all the states, except Manipur, Andhra Pradesh and Tamil Nadu in 2015-16," it said.
The paper, authored by NITI Aayog adviser Alok Kumar and other senior officials also said social sector expenditure in financial year 2015-16 has increased in absolute terms across all the states with respect to previous financial year.
For north eastern & Himalayan states (NE&HS), the average expenditure on health and education as percentage of GSDP has increased by about 0.40 percentage point to 1 percentage point.
"Maximum increase is witnessed in Mizoram for health and in J&K for education," the paper pointed out.
According to paper, at an aggregate level, 21.19 per cent more resources were available to the states during financial year 2015-16 by the way of central transfers as compared to 2014-15 fiscal.
"Barring Sikkim, Tripura and Uttarakhand, all other states are better off in terms of financial allocations in respect to FY 2014-15," it said.
Social sector includes expenditure on general education, technical education, sports and youth Services, public health, family welfare, water supply and sanitation, housing, urban development etc.