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Fiscal multipliers in India: A macro-model linking human development, growth and distribution

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  • Bose, Sukanya

    (National Institute of Public Finance and Policy)

  • Banerjee, Saikat

    (National Institute of Public Finance and Policy)

Abstract

A macroeconomic framework integrating growth, distribution and human development with social spending as a crucial link provides an alternative view for conceptualizing fiscal policy for India. In policy formulation, the growth potential of social spending is ignored while concerns about fiscal implications of social spending are overstated. Using a demand-side macro model incorporating necessary supply side features for the Indian economy, the growth implications of social spending is demonstrated. The social spending multiplier in India, estimated over 1990 to 2022 stands at 1.67, with implications for growth and human development following across several years. The results indicate that a combination of policies on social sector expenditure, along with policies on income redistribution are both growth-promoting and self-financing in nature.

Suggested Citation

  • Bose, Sukanya & Banerjee, Saikat, 2025. "Fiscal multipliers in India: A macro-model linking human development, growth and distribution," Working Papers 25/436, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:25/436
    Note: Working Paper 436, 2025
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