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The Quest for the Holy Grail: Efficient and Equitable Fiscal Consolidation in India

Author

Listed:
  • Mr. Chadi Abdallah
  • Mr. David Coady
  • Mr. Sanjeev Gupta
  • Emine Hanedar

Abstract

Achieving fiscal consolidation without undermining growth and poverty-reduction efforts is a key policy challenge in many countries. Using India as an illustration, this paper shows how a mix of well-designed taxation and spending policies can help address these challenges. On the tax side, the analysis focuses on increasing consumption taxes on goods with negative consumption externalities. On the spending side, some of the additional revenues from the tax reform are allocated to scaling up key social transfer programs. Substantial additional gains are possible if the increased social transfers can be accompanied by improved targeting.

Suggested Citation

  • Mr. Chadi Abdallah & Mr. David Coady & Mr. Sanjeev Gupta & Emine Hanedar, 2015. "The Quest for the Holy Grail: Efficient and Equitable Fiscal Consolidation in India," IMF Working Papers 2015/152, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2015/152
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    References listed on IDEAS

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    1. Mundle, Sudipto & Bhanumurthy, N.R. & Das, Surajit, 2011. "Fiscal consolidation with high growth: A policy simulation model for India," Economic Modelling, Elsevier, vol. 28(6), pages 2657-2668.
    2. Sheahan, Megan & Liu, Yanyan & Barrett, Christopher B. & Narayanan, Sudha, 2014. "Preferential resource allocation? Mahatma Gandhi National Rural Employment Guarantee Scheme in Andhra Pradesh," MGNREGS Project Note 3, International Food Policy Research Institute (IFPRI).
    3. David Coady, 2004. "Targeting Outcomes Redux," The World Bank Research Observer, World Bank, vol. 19(1), pages 61-85.
    4. Tapsoba, Sampawende J.-A., 2014. "Options and strategies for fiscal consolidation in India," Economic Modelling, Elsevier, vol. 43(C), pages 225-237.
    5. Jean Drèze & Reetika Khera, 2013. "Rural Poverty And The Public Distribution System," Working papers 235, Centre for Development Economics, Delhi School of Economics.
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    Cited by:

    1. Coady, David & Prady, Delphine, 2019. "Universal income in developing countries: Issues, options, and illustration for India," World Development Perspectives, Elsevier, vol. 16(C).
    2. Mr. David Coady & Delphine Prady, 2018. "Universal Basic Income in Developing Countries: Issues, Options, and Illustration for India," IMF Working Papers 2018/174, International Monetary Fund.
    3. Saurabh Shome & Frederico Gil Sander & Smriti Seth & Jaba Misra, 2015. "India Development Update, October 2015," World Bank Publications - Reports 22894, The World Bank Group.

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