16 research outputs found

    Debt, Deficits and Inflation: An Application to the Public Finances of India

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    The paper studies the solvency of the Indian public sector and the eventual monetization and inflation implied by stabilization of the debt-GNP ratio without any changes in the primary deficit. The nonstationarity of the discounted public debt suggests that indefinite continuation of the pattern of behavior reflected in the historical discounted debt process is inconsistent with the maintenance of solvency. This message is reinforced by the recent behavior of the debt-GNP ratio and the ratio of primary surplus plus seigniorage to GNP. Our estimates of the base money demand function suggest that even maximal use of seigniorage will not be sufficient to restore solvency.

    Indian Public Finance in the 1990s: Challenges and Prospects

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    Fiscal Rules in India: Are They Effective?

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    This paper, a chapter in the forthcoming Oxford University Press Handbook of the Indian Economy, edited by Chetan Ghate, considers India’s experience with fiscal (responsibility) rules during the past decade. After reviewing the basic facts concerning public debt and deficits in India, the background and basic arithmetic of the Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) are presented and commented upon. With the very small number of data points at our disposal, no formal statistical estimation and hypothesis testing about the efficacy of the rules can even be attempted. Instead we critically explore the outcomes of the FRBMA over the 5-year period of its operation, 2004/05-2008/09, using an eclectic but comprehensive metric comprising quantitative targets, qualitative strictures, transparency, integrity, and overall financial performance over the business cycle. We also briefly review fiscal responsibility legislation (and outcomes) at the state level. The evidence suggests that in recent years the fiscal space “vacated” by the states has been usurped by the central government. Finally, the recommendations of the 13th Finance Commission regarding a roadmap for fiscal consolidation are examined. We also outline a basic incentive compatible framework for state and central governments to hold each other accountable over agreed pre-determined targets.

    Infrastructure in India: The economics of transition from public to private provision

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    Indian infrastructure is in a state of flux. The provisioning of infrastructure services in India is steadily moving away from the realm of government to that of private sector. The critical issue has been getting economic structures right; in those sectors where there has been a recognition (and systemic implementation) of the principles of appropriate market structures, competition, and measured regulatory oversight, development has been rapid. The outcomes have varied by sector, with Indian telecom providing services that are globally cost-effective and electricity remaining a nightmare for consumers and a major bottleneck for India's continuing growth. While a few ports have significantly increased their efficiency, the ports sector overall remains behind international benchmarks. The initial remarkable spurt in the National Highways Development Project enabled (and probably to an extent, fuelled) growth, and brought in some of India's most innovative policy responses, but there has been a slowdown in momentum in expanding the programme. In recent years, there has simply not been the requisite (political) commitment to ownership of the innovation and motivation that is needed to sustain the pace of reform in key infrastructure sectors.Infrastructure Risk Market structure Regulation