Macroeconomic Policy
 
Budget subsidies of the central government and 14 major Indian states: 1987-88 and 2011-12
Sudipto Mundle , Satadru Sikdar
Posted on: 14 Mar 2017

This column presents estimates of the flow of subsidies through the budgets of the central government and 14 major Indian states in 1987-88 and 2011-12. The estimates show that the overall level of subsidies relative to GDP has declined, as has the share of non-merit subsidies. This suggests some improvement in efficiency in this aspect of public expenditure.
read on »
Are grain procurement shocks inflationary?
Chetan Ghate , Sargam Gupta , Debdulal Mallick
Posted on: 17 Oct 2016

Central banks in emerging markets grapple with understanding the inflationary impact of grain procurement shocks because the precise link between the agriculture sector and the rest of the economy may not be well understood. This column presents a framework to understand how the government’s grain procurement policy in India can be inflationary, and what the appropriate monetary policy response should be.
read on »
Union Budget 2016: Will it support India’s economic transformation?
Nirvikar Singh
Posted on: 08 Mar 2016

In this year’s Budget speech, the Finance Minister articulated the government’s agenda to ‘Transform India’ through a set of economic reforms framed in terms of ‘nine pillars’ - agriculture, rural development, health, education and skilling, infrastructure, financial sector, governance, fiscal discipline, and tax reform. In this article, Nirvikar Singh, Professor of Economics at the University of California Santa Cruz, summarises the highlights of the nine pillars and discusses whether or to what extent this Budget will support India’s economic transformation.
read on »
Household savings and India’s current account deficit
Nikhil Gupta
Posted on: 25 Sep 2015

India’s current account deficit widened consistently in the post-crisis period between 2008-09 and 2012-13. This column finds that while the public sector was the key driver of this trend in the first two years, the increased consumption/investment by households was responsible for the high deficit in the later period. It recommends that policymakers should now incentivise household savings rather than consumption/investments, which implies limited scope for further interest rate cuts.
read on »
How interest rates affect financial decisions of Indian households
Nikhil Gupta
Posted on: 17 Jul 2015

RBI has cut interest rates three times this year so far. While rate cuts are welcomed by the Indian corporate sector, their impact on households is less discussed. This column analyses the relationship between deposit rates and financial decisions of households. It finds that lower rates reduce net financial savings of households, which in turn reduces the resource pool available to the corporate sector.
read on »
Where is India’s growth story headed?
Ila Patnaik , Madhavi Pundit
Posted on: 25 May 2015

The global financial crisis and domestic policy paralysis led to a decline in firms’ investment activities and investors’ business confidence in India. Could this have affected the economy’s long-term growth? This column contends that institutional capacity for reform and the right policy action can render the negative investment shock temporary, and ensure that the trend growth of output remains strong.
read on »
Responding to external shocks
Ashima Goyal
Posted on: 30 Apr 2015

Following the global financial crisis of 2007-08, the Indian economy was exposed to various shocks. While the major source of shocks was external, the effects were magnified by certain lapses in domestic policy. This column discusses what policies worked and what did not work to reduce excessive rupee volatility, and how the lessons were applied to prepare for any future shocks.
read on »
The nuances of inflation targeting in India
Abhijit Sen Gupta , Rajeswari Sengupta
Posted on: 16 Mar 2015

How prepared is India for inflation targeting? This column suggests that the larger weight assigned by the RBI to tackling inflation over the years, relative to other policy objectives such as stabilising exchange rates, places it in a good position to make the transition to the new regime. However, limited control over supply shocks that impact inflation might continue to pose a challenge. Greater coordination between fiscal and monetary policy would improve the efficacy of inflation targeting.
read on »
Targeting nominal GDP
Pranjul Bhandari , Jeffrey Frankel
Posted on: 08 Jan 2015

Central banks, especially in developing countries, still seek transparent and credible communication. Yet signalling intentions in the conduct of monetary policy sometimes creates undesirable constraints. This column argues that it may be better to phrase central bank pronouncements in terms of nominal GDP, rather than in terms of inflation. If it is worth communicating a plan, it is worth choosing a plan that one can live with.
read on »
From tapering to tightening: The impact of the Fed’s exit on India
Kaushik Basu , Barry Eichengreen , Poonam Gupta
Posted on: 27 Nov 2014
Tags:   US

India was among the hardest hit by the Fed’s ‘taper talks’. This column argues that this impact was large for two reasons. First, India received huge capital flows before. This had made it a convenient target for investors seeking to rebalance away from emerging markets. Second, macroeconomic conditions had worsened, which rendered the economy vulnerable. The measures adopted in response were ineffective in stabilising the financial markets. Implementing a medium-term framework that limits vulnerabilities and restricts spillovers could be more successful.
read on »
123