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Macroeconomic Policy and Development in India: Some Analytical Issues

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  • Partha Sen

Abstract

Should a developing economy, such as India, have a macroeconomic policy framework that is identical to an advanced capitalist country? The answer is a “No”, because the developing economies have external constraints, that the more developed countries do not. They also, often, need to achieve a structural transformation by moving labour away from agriculture. These economies are, in addition, faced with possibility of international capital flow reversals. I argue for keeping the real exchange depreciated to have an export-led growth, emulating the East Asian experience. In today’s world, given protectionism in the advanced capitalist countries, this strategy is more challenging. Also the capacity of the State to deliver this is open to question.

Suggested Citation

  • Partha Sen, 2022. "Macroeconomic Policy and Development in India: Some Analytical Issues," CESifo Working Paper Series 10175, CESifo.
    • Handle: RePEc:ces:ceswps:_10175
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    References listed on IDEAS

    as
    1. Partha Sen, 2007. "Capital inflows, financial repression, and macroeconomic policy in India since the reforms," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 23(2), pages 292-310, Summer.
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    5. Francisco Rodríguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338, National Bureau of Economic Research, Inc.
    6. Weiss, Laurence M, 1980. "The Effects of Money Supply on Economic Welfare in the Steady State," Econometrica, Econometric Society, vol. 48(3), pages 565-576, April.
    7. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    8. Caballero, Ricardo J. & Krishnamurthy, Arvind, 2001. "International and domestic collateral constraints in a model of emerging market crises," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 513-548, December.
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    More about this item

    Keywords

    inflation targeting; big push; exchange rates; structural transformation;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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