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India’s Recent Macroeconomic Performance: An Assessment and the Way Forward

Author

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  • Kapur, Muneesh
  • Mohan, Rakesh

Abstract

The sustained high growth in an environment of macroeconomic and financial stability—recorded by the Indian economy prior to the North Atlantic financial crisis (NAFC) has suffered a setback. While the macroeconomic policy response after the NAFC was admirably rapid, there was overshooting of the stimulus, and its withdrawal was gradual. The stimulus measures led to high growth, averaging 9%, during 2009–11, but also sowed the seeds for inflationary and balance of payments pressures, necessitating the subsequent moderation in domestic demand and growth. The domestic slowdown was then further exacerbated by domestic policy bottlenecks. Appropriate policies in regard to domestic oil prices and fiscal consolidation will make more resources available to the private sector and contribute to the recovery of private sector investment. Fiscal consolidation would also facilitate a reduction in inflation, which would then have a moderating impact on gold imports and a favorable impact on the real exchange rate, exports and current account deficit. Given the growth and inflation expectations, interest rates in India can be expected to remain above those in advanced economies, even when we move away from the present aberrations of near zero interest rates in the major advanced economies; therefore, a prudent approach with regard to the opening up of debt flows to foreign investors needs to be pursued

Suggested Citation

  • Kapur, Muneesh & Mohan, Rakesh, 2014. "India’s Recent Macroeconomic Performance: An Assessment and the Way Forward," India Policy Forum, National Council of Applied Economic Research, vol. 10(1), pages 205-295.
  • Handle: RePEc:nca:ncaerj:v:10:y:2014:i:2014-1:p:205-295
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    File URL: https://www.ncaer.org/publication/india-policy-forum-2013-14
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    Citations

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    Cited by:

    1. Mr. Mehdi Raissi & Mr. Volodymyr Tulin, 2015. "Price and Income Elasticity of Indian Exports—The Role of Supply-Side Bottlenecks," IMF Working Papers 2015/161, International Monetary Fund.
    2. Tandon, Sharad, 2015. "How much do Experiential Measures of Food Security Tell us About Nutrition?," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 204911, Agricultural and Applied Economics Association.
    3. Raissi, Mehdi & Tulin, Volodymyr, 2018. "Price and income elasticity of Indian exports—The role of supply-side bottlenecks," The Quarterly Review of Economics and Finance, Elsevier, vol. 68(C), pages 39-45.
    4. Rakesh Mohan & Muneesh Kapur, 2015. "Pressing the Indian Growth Accelerator: Policy Imperatives," IMF Working Papers 2015/053, International Monetary Fund.
    5. Basu, Kaushik & Eichengreen, Barry & Gupta, Poonam, 2015. "From Tapering to Tightening:The Impact of the Fed’s Exit on India," India Policy Forum, National Council of Applied Economic Research, vol. 11(1), pages 1-66.
    6. Awan Setya Dewanta & Riza Noer Arfani & Erfita, 2016. "Elasticity and competitiveness of Indonesia’s palm oil export in India market," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 8(2), pages 148-158, April.
    7. Gupta,Poonam - DECOS, 2016. "Capital flows and central banking : the Indian experience," Policy Research Working Paper Series 7569, The World Bank.
    8. Abhijit Sen Gupta & Rajeswari Sengupta, 2014. "Is India ready for flexible inflation-targeting?," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-019, Indira Gandhi Institute of Development Research, Mumbai, India.
    9. Kapur, Muneesh, 2018. "Macroeconomic Policies and Transmission Dynamics in India," MPRA Paper 88566, University Library of Munich, Germany.
    10. Abhijit Sen Gupta & Rajeswari Sengupta, 2016. "Is India Ready for Inflation Targeting?," Global Economy Journal (GEJ), World Scientific Publishing Co. Pte. Ltd., vol. 16(3), pages 479-509, September.
    11. Sonia Chawla & Seema Rani, 2019. "Conundrum of Non-performing Assets Over Two Decades: An Analysis of Punjab National Bank," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 44(3), pages 263-284, August.

    More about this item

    Keywords

    Current Account; Capital Flows; Exchange Rate; Exports; Fiscal Policy; Gold; Growth; India; Monetary Policy; Oil Demand; Savings;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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