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Assessment of India's fiscal and external sector vulnerability: A balance sheet approach

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  • Pradhan, Krishanu

    (Institute for Social and Economic Change)

Abstract

The paper is an attempt to assess India’s fiscal and external sector vulnerability in the context of deterioration of major macroeconomic indicators in recent years. The analysis is based on the Balance Sheet Approach developed mainly by the IMF studies in analyzing the episodes of major fiscal, financial and external payment crisis in developing countries since late 1990s to early 2000. The present work assesses the vulnerability in India’s fiscal and external sector by descriptive and comparative analyses of relevant indicators, and developing a composite vulnerability index consisting of the indicators under study. If the inability to smooth financeability of public debts, budgetary deficits and external sector financing needs as the indicators of fiscal and external sector vulnerability, India does not face risk of such threat at present and hence signify an absence of overall macroeconomic vulnerability than generally perceived.

Suggested Citation

  • Pradhan, Krishanu, 2014. "Assessment of India's fiscal and external sector vulnerability: A balance sheet approach," Working Papers 327, Institute for Social and Economic Change, Bangalore.
  • Handle: RePEc:sch:wpaper:327
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    File URL: http://www.isec.ac.in/WP%20327%20-%20Krishanu%20Pradhan.pdf
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    References listed on IDEAS

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    1. Bachellerie, A. & Couillault, B., 2005. "Public debt sustainability and crises in emerging market countries: a presentation of the concepts and diagnostic tools," Financial Stability Review, Banque de France, issue 6, pages 63-80, June.
    2. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2007. "A Balance-Sheet Approach to Fiscal Sustainability," Working Paper Series rwp07-044, Harvard University, John F. Kennedy School of Government.
    3. Buiter, Willem H. & Patel, Urjit R., 1992. "Debt, deficits, and inflation: An application to the public finances of India," Journal of Public Economics, Elsevier, vol. 47(2), pages 171-205, March.
    4. Charles Wyplosz, 2007. "Debt Sustainability Assessment: The IMF Approach and Alternatives," IHEID Working Papers 03-2007, Economics Section, The Graduate Institute of International Studies.
    5. Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "The Forgotten History of Domestic Debt," Economic Journal, Royal Economic Society, vol. 121(552), pages 319-350, May.
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    Keywords

    Banking; Public debt; Fiscal imbalance;

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