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New issues in Indian macro policy

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Author Info

  • Shah, Ajay

    () (National Institute of Public Finance and Policy)

Abstract

Macroeconomic policy thinking in India has been rooted in an environment with five key parameters: agricultural shocks rather than a conventional business cycle, a closed economy, deeply distortionary tax policy coupled with a fiscal crisis, financial markets that lacked speculative price discovery, and a monetary policy shaped by deficit financing. This environment has been completely altered through India's integration into the world economy, the rise of one financial market (the equity market), the reduced importance of the monsoon, the rise of conventional business cycle dynamics, a partial abatement of the fiscal crisis and a monetary policy environment with loss of autonomy owing to exchange rate pegging. These changes call for a rethink of the macroeconomic policy framework. The agenda of assuring fiscal stability needs to be seen to its conclusion. Monetary policy and fiscal policy need to be converted into tools for macroeconomic stabilisation.

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Bibliographic Info

Paper provided by National Institute of Public Finance and Policy in its series Working Papers with number 08/51.

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Length: 28
Date of creation: May 2008
Date of revision:
Handle: RePEc:npf:wpaper:08/51

Note: Working Paper 51, 2008
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Web page: http://www.nipfp.org.in

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Keywords: Macroeconomics;

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  1. Elena Glinskaya & Michael Lokshin, 2007. "Wage differentials between the public and private sectors in India," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(3), pages 333-355.
  2. Ajay Shah, 2005. "A sustainable and scalable approach in Indian pension reform," Working Papers id:237, eSocialSciences.
  3. A. Prasad & Adarsh Kishore, 2007. "Indian Subnational Finances: Recent Performance," IMF Working Papers 07/205, International Monetary Fund.
  4. Norbert Janssen & Charles Nolan & Ryland Thomas, 2004. " Money, Debt and Prices in the UK 1705-1996," CDMA Working Paper Series 0407, Centre for Dynamic Macroeconomic Analysis.
  5. Rao, M. Govinda, 2005. "Tax system reform in India: Achievements and challenges ahead," Journal of Asian Economics, Elsevier, vol. 16(6), pages 993-1011, December.
  6. M. S. Mohanty & Marc Klau, 2004. "Monetary policy rules in emerging market economies: issues and evidence," BIS Working Papers 149, Bank for International Settlements.
  7. Rajaraman, Indira, 2004. "Fiscal restructuring in the context of trade reform," Working Papers 04/7, National Institute of Public Finance and Policy.
  8. Edward Nelson, 2004. "The U.K.’s rocky road to stability," Monetary Trends, Federal Reserve Bank of St. Louis, issue Oct.
  9. Vijay Joshi, 2003. "India and the Impossible Trinity," The World Economy, Wiley Blackwell, vol. 26(4), pages 555-583, 04.
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Cited by:
  1. Eswar S. Prasad, 2009. "India’s Approach to Capital Account Liberalization," Working Papers id:2043, eSocialSciences.
  2. Ajay Shah & Ila Patnaik, 2008. "Managing Capital Flows: The Case of India," Working Papers id:1570, eSocialSciences.
  3. repec:pra:mprapa:39771 is not listed on IDEAS
  4. Aizenman, Joshua & Sengupta, Rajeswari, 2011. "The financial trilemma in China and a comparative analysis with India," MPRA Paper 34485, University Library of Munich, Germany.
  5. Paunic, Alida, 2009. "I did it my way," MPRA Paper 17547, University Library of Munich, Germany.

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