ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Lekha ChakrabortySubscribe to Lekha Chakraborty

Covid-19 and Macroeconomic Uncertainty

The macroeconomic uncertainty created by COVID-19 is hard to measure. The situation demands simultaneous policy intervention in terms of public health infrastructure and livelihood. Along with the global community, India too has announced its initial dose of fiscal and monetary policy responses. However, more fiscal–monetary policy coordination is required to scale up the policy response to the emerging crisis. Innovative sources of financing the deficit, including money financing of fiscal programmes, a variant of “helicopter money,” need to be explored.

Fiscal Consolidation Ex Post the ‘Escape Clause’

Launching an “excessive deficit procedure” in India is inevitable for growth revival. This is crucial, especially when there is considerable ambiguity about why the “escape clause” was invoked in the Union Budget 2020: whether to meet the shortfall in tax revenue emanating from the unanticipated fiscal outcomes of structural reforms, or to boost the capital formation in the economy.

Indian Fiscal Federalism at the Crossroads

The abolition of the Planning Commission, the creation of the NITI Aayog, the constitutional amendment to introduce the goods and services tax, the establishment of the goods and services tax council, and the historically high tax devolution to the states based on the Fourteenth Finance Commission have changed the union–state fiscal relations fundamentally. The changing contours of union–state fiscal relations discussed in the context of the release of a recent book Indian Fiscal Federalism by Y V Reddy and G R Reddy are presented here.

Challenges to Indian Fiscal Federalism

The state of cooperative federalism in India is analysed by focusing on the trends in vertical fiscal imbalances between the centre and the states, the impact of Fiscal Responsibility and Budget Management acts on the fiscal space of the states, the implications of the Terms of Reference of the Fifteenth Finance Commission, and the need for empowering local governments in the context of centre–state relations.

Will UDAY Brighten Up Rajasthan’s Finances?

Fiscal prudence in most countries, including India, is focused on general government deficit. Though there is strong merit in focusing on the public sector borrowing requirement (PSBR) to judge fiscal health, paucity of data and its timeliness always prevented having a consolidated view of public...

New FRBM Framework

The structural inability to control revenue deficits needs different solutions from the usual argument that the utilisation of government expenditure is inefficient and that the government should spend less. It is time to relook at the way the union government spends.

State Level Debt–Deficit Dynamics

An analysis of the debt and deficit of states based on the budget estimates of 2016–17 shows that almost half of them have a fiscal deficit target higher than the limit set in the Fiscal Responsibility and Budget Management Act. These states need to focus on the quality of expenditure and elimination of revenue deficit as per the framework proposed by the Fourteenth Finance Commission to enhance state-level capital spending.

Beyond Fiscal Prudence and Consolidation

Since sustainable deficit could be different than the numeric fiscal rule, a review of the Fiscal Responsibility and Budget Management Act is timely and important. However, such a review should bear in mind that macro-stabilisation is a central function and the burden of fiscal adjustment should squarely fall on the union government keeping state debt and deficits withinFRBM limits. Maintaining the higher tax to gross domestic product ratio of last year will be key for fiscal prudence in 2016-17.

Fiscal Consolidation, Macro Fundamentals and Growthin Budget 2013-14

Due to the tight monetary policy stance adopted by the Reserve Bank of India for a sustained period of time to control infl ation, the burden of correcting macroeconomic imbalances and reviving growth seems to have fallen entirely on the Union Budget and fi scal policy. The fi scal consolidation proposed in the Union Budget for 2013-14 is a combination of a marginal reduction in aggregate non-Plan expenditure and buoyant revenue growth. If revenue targets are not met, fi scal consolidation can go off the track as the scope for expenditure contraction is limited.

Subnational Public Finance in Times of Recession

The recession of 2008-09 resulted in a decline in fiscal transfers and stagnant revenue buoyancy, compressing the fiscal space of the states. A critical review of the findings of the Reserve Bank of India's State Finances: A Study of Budgets of 2009-10 that attempted to understand how the crisis-induced economic downturn affected state-level fiscal imbalances and subnational expenditures.

Analysing the Raghuram Rajan Committee Report on Financial Sector Reforms

The Raghuram Rajan Committee has articulated "GenNext" reforms for fixing the problems of the financial sector. This note questions the relevance of the macroeconomic framework of the committee and argues that moving towards price determinacy via interest rate pegging is fallacious in the Indian context.
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