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New issues in Indian macro policy

  • Shah, Ajay


    (National Institute of Public Finance and Policy)

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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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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  1. repec:ind:nipfwp:07 is not listed on IDEAS
  2. 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.
  3. Rajaraman, Indira, 2004. "Fiscal restructuring in the context of trade reform," Working Papers 04/7, National Institute of Public Finance and Policy.
  4. A. Prasad & Adarsh Kishore, 2007. "Indian Subnational Finances: Recent Performance," IMF Working Papers 07/205, International Monetary Fund.
  5. M. S. Mohanty & Marc Klau, 2004. "Monetary policy rules in emerging market economies: issues and evidence," BIS Working Papers 149, Bank for International Settlements.
  6. Glinskaya, Elena & Lokshin, Michael, 2005. "Wage differentials between the public and private sector in India," Policy Research Working Paper Series 3574, The World Bank.
  7. Nicoletta Batini & Edward Nelson, 2005. "The U.K.'s rocky road to stability," Working Papers 2005-020, Federal Reserve Bank of St. Louis.
  8. 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.
  9. Vijay Joshi, 2003. "India and the Impossible Trinity," The World Economy, Wiley Blackwell, vol. 26(4), pages 555-583, 04.
  10. 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.
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