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Macroeconomics of “NaMo” Budget 2014 in India

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  • Chakraborty, Lekha S

Abstract

The present government has inherited an economy characterised by low growth, high inflation, high current account deficit and large fiscal imbalance at the Union level. What has struck me about Union budget 2014-15 is not the fiscal arithmetic, but the macroeconomic framework. One could sense a deal for fiscal-monetary policy co-ordination in the budget speech, especially with the announcement of Finance Minister for a “New Monetary framework”. The paper focuses on the macroeconomic framework of the budget rather than dealing with the fiscal arithmetic, in terms of policy announcements and budgetary allocations. The dynamics between North Block and Mint Road is always challenging, and so far India has witnessed a fiscal dominance, over monetary policy.The announcement by Finance Minister on “new monetary framework” for India needs to be co-read with the advancements in RBI seeking more ‘central bank independence’ to manage inflation and how it plays out in the macroeconomic context of India in light of the Expert Committee to Revise and Strengthen the Monetary Policy Framework. The underlying macroeconomic framework of the budget revealed two thematic priorities of the present government; (i) growth revival and (ii) macroeconomic stability. This sets the track. The Union budget was simultaneously ensuring a ‘continuity’ and ‘change’. The ‘continuity’ elements in the budget may be to ensure a bipartisan approach in tackling the issues of national interest, especially in case of fiscal consolidation path of earlier government. However the ‘changes’ suggested in the budget in terms of new monetary framework is disturbing.

Suggested Citation

  • Chakraborty, Lekha S, 2014. "Macroeconomics of “NaMo” Budget 2014 in India," MPRA Paper 67045, University Library of Munich, Germany, revised 2014.
    • Handle: RePEc:pra:mprapa:67045
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    References listed on IDEAS

    as
    1. Chakraborty, Lekha S., 2006. "Fiscal deficit, capital formation, and crowding out: Evidence from India," Working Papers 06/43, National Institute of Public Finance and Policy.
    2. Chakraborty, Pinaki & Chakraborty, Lekha S, 2006. "Is Fiscal Policy Contracyclical in India: An Empirical Analysis," MPRA Paper 7604, University Library of Munich, Germany.
    3. Chakraborty, Lekha, 2012. "Determination of Interest Rate in India: Empirical Evidence on Fiscal Deficit-Interest Links and Financial Crowding Out," Working Papers 12/110, National Institute of Public Finance and Policy.
    4. Lekha S. Chakraborty, 2012. "Interest Rate Determination in India: Empirical Evidence on Fiscal Deficit--Interest Rate Linkages and Financial Crowding Out," Economics Working Paper Archive wp_744, Levy Economics Institute.
    5. Philip Arestis, 2009. "The New Consensus in Macroeconomics: A Critical Appraisal," Palgrave Macmillan Books, in: Giuseppe Fontana & Mark Setterfield (ed.), Macroeconomic Theory and Macroeconomic Pedagogy, chapter 5, pages 100-117, Palgrave Macmillan.
    6. Hrishikesh Vinod & Lekha S. Chakraborty & Honey Karun, 2014. "If Deficits Are Not the Culprit, What Determines Indian Interest Rates? An Evaluation Using the Maximum Entropy Bootstrap Method," Economics Working Paper Archive wp_811, Levy Economics Institute.
    7. Lekha Chakraborty, 2007. "Fiscal Deficit, Capital Formation, and Crowding Out in India: Evidence from an Asymmetric VAR Model," Economics Working Paper Archive wp_518, Levy Economics Institute.
    8. Nelson, Richard R., 2008. "What enables rapid economic progress: What are the needed institutions," Research Policy, Elsevier, vol. 37(1), pages 1-11, February.
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    More about this item

    Keywords

    Fiscal Consolidation ; New Monetary Framework; Union Budget India;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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