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Budgetary processes: a political economy perspective

  • Goyal, Ashima

The response to macro shocks, given the electoral structure, built in perverse incentives that influenced India's development process. The chapter selectively surveys political economic theory, Indian and other country experience to bring out the systemic incentives that affect political behaviour, government budgets, and expenditure. Conceptual categories developed are found useful in interpreting Indian experience. Overtime, conflicts between groups were handled in a way that lowered incentives for expansion of the cake, and led to a short-term focus. Price controls bred inefficiencies, especially after the oil shocks. But there are leverage points for change. Well-coordinated macro policy, including infrastructure spending, with some restraints on political-bureaucratic choices, could create incentives for rapid growth. The latter eases political adjustments. It makes longer-term sustainable re-distribution feasible, and raises returns to choices that improve human capital.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27786.

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Date of creation: 2003
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Handle: RePEc:pra:mprapa:27786
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  1. Goyal, Ashima, 1999. "The Political Economy of the Revenue Deficit," MPRA Paper 29980, University Library of Munich, Germany.
  2. Basu, Kaushik, 2003. "Prelude to Political Economy: A Study of the Social and Political Foundations of Economics," OUP Catalogue, Oxford University Press, number 9780199261857.
  3. Ashima Goyal & A. K. Jha, 2005. "Dictatorship, Democracy and Institutions: Macropolicy in China and India," Working Papers id:264, eSocialSciences.
  4. Austen-Smith, David & Banks, Jeffrey., 1987. "Elections, Coalitions, and Legislative Outcomes," Working Papers 643, California Institute of Technology, Division of the Humanities and Social Sciences.
  5. Goyal, Ashima, 2002. "Coordinating monetary and fiscal policies: a role for rules?," MPRA Paper 29200, University Library of Munich, Germany.
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