Fiscal deficits and government debt in India: Implications for growth and stabilisation.

This paper examines the long term profile of fiscal deficit and debt relative to GDP in India, with a view to analysing debt-deficit sustainability issues along with the considerations relevant for determining suitable medium and short-term fiscal policy stance. The impact of debt and fiscal deficit on growth and interest rates that arises from their effect on saving and investment are critical in any examination of sustainability of debt and deficit. It is argued that large structural primary deficits and interest payments relative to GDP have had an adverse effect on growth in recent years. The Fiscal Responsibility and Budget management Act (FRBMA) of the central government has certain positive features. While the fiscal deficit target has been defined, it should be considered in conjunction with a target debt-GDP ratio. Further, the central FRBMA should be supplemented by state level fiscal responsibility legislations and an effective hard budget constraint on subnational borrowing. There is a clear need to bring down the combined debt-GDP ratio from its current level, which is in excess of 80 percent of GDP. The process of adjustment can be considered in two phases: adjustment phase and stabilisation phase. In the adjustment phase, fiscal deficit should be reduced in each successive year until revenue deficit, and correspondingly, government dissaving, is eliminated. In the second phase, fiscal deficit could be stabilised at 6 percent of GDP. The debt-GDP ratio would eventually stabilise at 56 percent. In this process, the ratio of interest payments to revenue receipts will fall, enabling a progressively larger amount of primary revenue expenditure to be incurred on the social sectors.Fiscal deficit ; Economic growth

Fiscal transfer in Australia: Review and relevance to India.

This paper examines the working of Australia's fiscal transfer system in the context of its long term evolution, paying particular attention to salient changes that have occurred since the introduction of a comprehensive Goods and Services Tax (GST). The GST has served to increase the vertical imbalance in the system, which was high even prior to this change, by placing more revenue resources with the commonwealth government in Australia. In spite of a high degree of expenditure centralisation, considerable emphasis is placed in Australia for achieving horizontal fiscal equalisation through an elaborate mechanism of equalisation transfers, which looks into both revenue and expenditure sides of the state budgets and calculates revenue and expenditure `disabilities' that account for departures from a pure equal per capita distribution of the shareable amounts. This paper looks at the equity and efficiency implications of the Australian equalisation transfers and considers its relevance for the Indian system, which has many comparable features. Apart from the need for making equalising features of the Indian transfer system more transparent, there is need for emphasising some cost disabilities, particularly those that are structural and exogenous in nature.Fiscal transfer ; Australia

Reforming India’s Fiscal Transfer System : Resolving Vertical and Horizontal Imbalances

Two central problems in a fiscal transfer systemrelate to resolving vertical and horizontal imbalances. In the context of the setting of the 13th Finance Commission, this paper looks at the methodological background of fiscal transfers followed by recent Finance Commissions in India, particularly the Twelfth Finance Commission (TFC). It is noted that in India, there is long - term stability in the share of states after transfers in the combined revenues of the centre and the states. It is argued that this stability depends on linking the share of states in the transfers, particularly tax devolution with the difference in the buoyancies of central and states taxes. In the context of horizontal imbalance, it is argued that some of the recent Finance Commissions have implicitly followed an axiomatic approach to tax devolution and brought in some normative elements in determining grants. In spite of large difference in fiscal capacities, a high degree of equalization has been achieved. It is shown, for example, that in the case of TFC recommended transfers, nearly 88 percent of needed equalization was achieved while devoting 50 percent of transfers to resolving vertical imbalance. Amethodology is also developed to determine weights of vertical and equalizing components of transfers through devolution. In the case of the Twelfth Finance Commission, the horizontal component of tax devolution is strengthened by a scheme of equalizing health and education grants.fiscal transfer system, vertical imbalance, horizontal imbalance, Twelfth Finance Commission

Remarks on non-gaussian fluctuations of the inflaton and constancy of \zeta outside the horizon

We point out that the non-gaussianity arising from cubic self interactions of the inflaton field is proportional to \xi N_e where \xi ~ V"' and N_e is the number of e-foldings from horizon exit till the end of inflation. For scales of interest N_e = 60, and for models of inflation such as new inflation, natural inflation and running mass inflation \xi is large compared to the slow roll parameter \epsilon ~ V'^{2}. Therefore the contribution from self interactions should not be outrightly ignored while retaining other terms in the non-gaussianity parameter f_{NL}. But the N_e dependent term seems to imply the growth of non-gaussianities outside the horizon. Therefore we briefly discuss the issue of the constancy of correlations of the curvature perturbation \zeta outside the horizon. We then calculate the 3-point function of the inflaton fluctuations using the canonical formalism and further obtain the 3-point function of \zeta_k. We find that the N_e dependent contribution to f_{NL} from self interactions of the inflaton field is cancelled by contributions from other terms associated with non-linearities in cosmological perturbation theory.Comment: 16 pages, Minor changes, matches the published version. v3: Minor typo correcte

Features in the Primordial Spectrum from WMAP: A Wavelet Analysis

Precise measurements of the anisotropies in the cosmic microwave background enable us to do an accurate study on the form of the primordial power spectrum for a given set of cosmological parameters. In a previous paper (Shafieloo and Souradeep 2004), we implemented an improved (error sensitive) Richardson-Lucy deconvolution algorithm on the measured angular power spectrum from the first year of WMAP data to determine the primordial power spectrum assuming a concordance cosmological model. This recovered spectrum has a likelihood far better than a scale invariant, or, `best fit' scale free spectra (\Delta ln L = 25 w.r.t. Harrison Zeldovich, and, \Delta ln L = 11 w.r.t. power law with n_s=0.95). In this paper we use Discrete Wavelet Transform (DWT) to decompose the local features of the recovered spectrum individually to study their effect and significance on the recovered angular power spectrum and hence the likelihood. We show that besides the infra-red cut off at the horizon scale, the associated features of the primordial power spectrum around the horizon have a significant effect on improving the likelihood. The strong features are localised at the horizon scale.Comment: 8 pages, 4 figures, uses Revtex4, matches version accepted to Phys. Rev. D, main results and conclusions unchanged, references adde

Agricultural growth and industrial performance in India:

Agriculture Economic aspects India., Industries India.,