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New issues in Indian macro policy


  • Ajay Shah



For many decades, macro-policy in India was conducted in an environment with five key elements: 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 which was shaped by deficit financing. The paper argues that India has changed beyond recognition on all these five elements and that these changes have far-reaching consequences for the conduct of macroeconomic policy. India is now a more conventional market economy, and there is a much bigger role for the great themes of macroeconomics - as it is practised elsewhere in the world - in shaping Indian macro policy. [NIPFP-WP]

Suggested Citation

  • Ajay Shah, 2008. "New issues in Indian macro policy," Working Papers id:1478, eSocialSciences.
  • Handle: RePEc:ess:wpaper:id:1478 Note: Institutional Papers

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    References listed on IDEAS

    1. Ananthakrishnan Prasad & Adarsh Kishore, 2007. "Indian Subnational Finances; Recent Performance," IMF Working Papers 07/205, International Monetary Fund.
    2. Norbert Janssen & Charles Nolan & Ryland Thomas, 2004. "Money, Debt and Prices in the UK 1705-1996," CDMA Working Paper Series 200407, Centre for Dynamic Macroeconomic Analysis.
    3. M. S. Mohanty & Marc Klau, 2004. "Monetary policy rules in emerging market economies: issues and evidence," BIS Working Papers 149, Bank for International Settlements.
    4. Rajaraman, Indira, 2004. "Fiscal restructuring in the context of trade reform," Working Papers 04/7, National Institute of Public Finance and Policy.
    5. Ila Patnaik, 2003. "The Consequences of currency intervention in India," Indian Council for Research on International Economic Relations, New Delhi Working Papers 114, Indian Council for Research on International Economic Relations, New Delhi, India.
    6. Vijay Joshi, 2003. "India and the Impossible Trinity," The World Economy, Wiley Blackwell, vol. 26(4), pages 555-583, April.
    7. 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.
    8. 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.
    9. Edward Nelson, 2004. "The U.K.’s rocky road to stability," Monetary Trends, Federal Reserve Bank of St. Louis, issue Oct.
    10. repec:npf:wpaper:07 is not listed on IDEAS
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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, 2010. "Managing Capital Flows: The Case of India," Chapters,in: Managing Capital Flows, chapter 9 Edward Elgar Publishing.
    3. Rajeswari Sengupta, 2015. "The Impossible Trinity: Where does India stand?," Working Papers id:6659, eSocialSciences.
    4. Hutchison, Michael M. & Sengupta, Rajeswari & Singh, Nirvikar, 2013. "Dove or Hawk? Characterizing monetary policy regime switches in India," Emerging Markets Review, Elsevier, vol. 16(C), pages 183-202.
    5. Prasad, Eswar S., 2009. "Some New Perspectives on India’s Approach to Capital Account Liberalization," India Policy Forum, National Council of Applied Economic Research, vol. 5(1), pages 125-178.
    6. Prachi Mishra & Peter J Montiel & Rajeswari Sengupta, 2016. "Monetary Transmission in Developing Countries; Evidence from India," IMF Working Papers 16/167, International Monetary Fund.
    7. repec:pra:mprapa:39771 is not listed on IDEAS
    8. Aizenman, Joshua & Sengupta, Rajeswari, 2011. "The financial trilemma in China and a comparative analysis with India," MPRA Paper 39798, University Library of Munich, Germany, revised 03 Jul 2012.
    9. Paunic, Alida, 2009. "I did it my way," MPRA Paper 17547, University Library of Munich, Germany.


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