Public Expenditure Benefit Incidence on Health: Selective Evidence from India

NIPFP Working Paper 111
[PDF]

Lekha Chakraborty, Yadawendra Singh and Jannet Farida Jacob
December 2012

Abstract

Effectiveness of public spending still remains relatively an elusive empirical issue. This preliminary analysis is an attempt on the topic, using benefit incidence methodology, at the subnational government level in health sector of India. The results revealed public health system is ‘seemingly’ more equitable in a few States, while a regressivity in pattern of utilization of public health care services is observed in other States. Both these evidences were to be considered with caution, as the underdeveloped market for private inpatient care in some states might be the factor for disproportionate crowding-in of inpatients, which made the public health care system looked ‘seemingly’ more equitable. However, the ‘voting with feet’ to better private services seems evident only for the affordable higher income quintiles. Results also suggest that polarization is distinctly evident in the public provisioning of heath care services, more related to the in-patient services than the ambulatory services.

Determination of Interest Rate in India: Empirical Evidence on Fiscal Deficit-Interest Links and Financial Crowding Out

NIPFP Working Paper 110
[PDF]

Lekha Chakraborty
December 2012

Abstract

Controlling for the capital flows, using the high frequency macrodata of financially deregulated regime, the paper examined whether there is any evidence of fiscal deficit determining interest rate in the context of India. The period of analysis is FY 2006-07[04] to FY 2011[04]. Quite contrary to the debates in the policy circles, the results found that increase in fiscal deficit does not cause the rise in interest rates. Using the asymmetric vector autoregressive model, it is established that the rate of interest is affected by the reserve money changes, expected inflation and volatility in the capital flows, but not the fiscal deficit. This result has significant policy implications for interest rate determination in India. The long term and short term interest rates are analysed to determine the occurrence of financial crowding out, but fiscal deficit does not appear to be causing both shorts and longs.

How Indian Voters Respond to Candidates with Criminal Charges: Evidence from the 2009 Lok Sabha Elections

NIPFP Working Paper 109
[PDF]

Bhaskar Dutta and Poonam Gupta
October 2012

Abstract

This paper examines the response of voters to candidates who have reported that they have criminal charges against them, within the framework of a simple analytical model which assumes that criminal charges give rise to some stigma amongst the electorate, and result in a negative effect on vote shares. Campaigning, the cost of which is borne from candidates’ wealth, helps a candidate to increase his or her expected vote share by winning over the “marginal” voter. A criminal candidate gets an additional benefit since he can use the campaigning to convince voters of his innocence, and so reduce the negative effects of the stigma associated with criminal charges. We test the implications of the model using data for the 2009 Lok Sabha elections in India, and find support for all the implications of the model. Our empirical results show that voters do penalise candidates with criminal charges; however, this negative effect is reduced if there are other candidates in the constituency with criminal charges; besides, the vote shares are positively related to candidate wealth, with the marginal effect being higher for the candidates with criminal charges.

A Cost-Benefit Analysis of Aadhaar

National Institute of Public Finance and Policy
November 2012
[Link]

Abstract

This study estimates the costs and benefits of Aadhaar. We find that substantial benefits would accrue to the government by integrating Aadhaar with schemes such as PDS, MNREGS, fertiliser and LPG subsidies, as well as housing, education and health programmes. The benefits arise from the reduction in leakages that occur due to identification and authentication issues. Our analysis takes into account the costs of developing and maintaining Aadhaar, and of integrating Aadhaar with the schemes over the next ten years. Even after taking all costs into account, and making modest assumptions about leakages, of about 7-12 percent of the value of the transfer/subsidy, we find that the Aadhaar project would yield an internal rate of return in real terms of 52.85 percent to the government.

Diesel Pricing in India: Entangled in Policy Maze

NIPFP Working Paper 108
[PDF]

Mukesh Kumar Anand
October 2012

Abstract

This paper identifies the important economic activities that use diesel and discusses the contribution of those sectors in GDP. Other important petroleum products and, their limited substitution possibility in the extant technological setting are highlighted. The modal-mix for transportation in India is also discussed. The relevant policy agenda for diesel in the vision statement for hydrocarbon sector is presented along with a summary on evolution of petroleum products pricing regimes. The importance of petroleum taxes for public finance at the federal and provincial levels is discussed in the context of wider reforms in administration of taxes. The impact of changes in diesel and / or petroleum prices, including taxes and subsidies, is explored along a few dimensions. Cost of diesel (and / or petroleum products) as a proportion of total cost of production is presented for certain users / sectors, and some suggestions on reform imperatives are offered.

Bihar: What Went Wrong? And What Changed?

NIPFP Working Paper 107
[PDF]

Arnab Mukherji and Anjan Mukherji
September 2012

New Thinking on Corporate Bond Market in India

NIPFP Working Paper 106
[PDF]

Sanjay Banerji, Krishna Gangopadhyay, Ila Patnaik and Ajay Shah
September 2012

Energy Savings Potential and Policy for Energy Conservation in Selected Indian Manufacturing Industries

NIPFP Working Paper 105
[PDF]

Manish Gupta and Ramprasad Sengupta
September 2012

Abstract

Minimization of damage from the rising trend of global warming would warrant two kinds of action for a country like India: a) abatement of greenhouse gas emissions and b) adaptation to climate change so as to reduce climate change related vulnerability of the people. The target of low carbon economic growth of India in terms of declining energy and carbon intensity of GDP assumes, therefore, a special significance in such context. Of the different options for lowering carbon intensity of GDP, the option of energy conservation through reduced energy intensity of output happens to be cheaper in most cases than the carbon free energy supply technology options. As the industrial sector has the largest sectoral share of final energy consumption in India this paper focuses on the assessment of energy savings potential in seven highly energy consuming industries. The paper estimates the energy savings potential for each of these industries using unit level Annual Survey of Industries data for 2007-08. The paper further develops an econometric model admitting substitutability among energy and other non-energy inputs as well as that among fuels using translog cost function for the selected industries and also for the manufacturing sector as a whole to study the behavioural response of the industries to changes in factor prices or fuel prices. The model uses time series data at the aggregate level of the concerned industry for the period 1991-92 to 2008-09. The results of the model point mostly to the significant response of energy consumption to own price increases and to the insignificance of the responsiveness of the corresponding capital requirement to effect such energy conservation. Besides, a large part of the growth of factor productivity as estimated by the model has been found to be induced by energy price changes, the price neutral component of technical change being negligible. All these have important policy significance in respect of the relevance and direction of fiscal, monetary or other policy instruments for energy conservation in India for abating global warming.

The Quality of Governance - How Have Indian States Performed?

NIPFP Working Paper 104
[PDF]

Sudipto Mundle, Pinaki Chakraborty, Samik Chowdhury, and Satadru Sikdar
July 2012

Foreign Investors under Stress: Evidence from India

NIPFP Working Paper 103
[Link]

Ila Patnaik, Ajay Shah and Nirvikar Singh
June 2012

Abstract

Emerging market policy makers have been concerned about the financial stability implications of financial globalisation. These concerns are focused on behaviour under stressed conditions. Do tail events in the home country trigger off extreme responses by foreign investors – are foreign investors `fair weather friends'? In this, is there asymmetry between the responses of foreign investors to very good versus very bad days? Do foreign investors have a major impact on domestic markets through large inflows or outflows – are they ‘big fish in a small pond’? Do extreme events in world markets induce extreme behaviour by foreign investors, thus making them vectors of crisis transmission? We propose a modified event study methodology focused on tail events, which yields evidence on these questions. The results, for India, do not support the skeptical perspective on financial globalisation.

Export of Services: Indian Experience in Perspective

NIPFP Working Paper 102
[PDF]

Barry Eichengreen and Poonam Gupta
March 2012

Abstract

We survey India’s experience with exporting services. We show that its experience is unique in that modern tradable services are a significantly larger share of GDP than in other countries at comparable levels of economic development. This has not always been the case, however: India’s out-performance is limited to recent years. Policy initiatives, from trade reform to liberalization of domestic industrial and service sectors, were important for jump-starting the process. Regression analysis of a cross section of countries points to the importance of a range of additional factors: overall economic development, communications infrastructure, access to foreign technology, and spillovers between the merchandise and service exports. Importantly, however, these factors, jointly or individually, do not eliminate Indian exceptionalism. Not only is India a significant outlier but it becomes more so as the period proceeds.

Political Determinants of the Allocation of Public Expenditures: A Study of the Indian States

NIPFP Working Paper 101
[PDF]

Bharatee Bhusana Dash and Angara V. Raja
March 2012

Abstract

This study examines whether the allocation of public expenditures of the Indian states are significantly influenced by government specific political characteristics. Three types of government specific characteristics are considered: forms of governments, ideology of the government, and the electoral cycle. A number of hypotheses are designed to link these characteristics with expenditure allocation. The hypotheses are tested using a panel dataset of 14 Indian states spread over 27 fiscal years, from 1980-81 to 2006-07. The overall findings of the study suggest that the relationship between expenditure allocation and political determinants across the Indian states validate the proposed hypotheses even after controlling for the traditional and other unobservable determinants. These findings are robust to various forms of sensitivity analyses.

Health Care Financing Reforms in India

NIPFP Working Paper 100
[PDF]

M. Govinda Rao and Mita Choudhury
March 2012

The Second Fundamental Theorem of Positive Economics

NIPFP Working Paper 98
[PDF]

Anjan Mukherji
March 2012

Abstract

Welfare Economics is fortunate that there are two Fundamental Theorems of Welfare Economics. Positive Economics on the other hand is seemingly endowed with none. One of the fundamental results of Positive Economics is that a competitive equilibrium exists under fairly general conditions; this then may be called the First Fundamental Theorem of Positive Economics (FFTPE). The existing results on uniqueness and stability of competitive equilibrium are far too restrictive to be up for consideration as a Fundamental Theorem. It is to re-examine this question that we revisit the question of stability of competitive equilibrium. It is shown that if, for all distributions of the aggregate endowment, the matrix sum of the Jacobian of the excess demand function plus its transpose, evaluated at the equilibrium, have maximal rank then equilibria will be locally asymptotically stable. When this condition is not met, it is shown how redistributing resources will always make a competitive equilibrium price configuration stable and this need not involve redistributing endowments so that trades do not exist at equilibrium. This last result is quite general and the only requirement is that the rank condition referred to earlier hold at zero trade competitive equilibria and consequently may qualify to be called the Second Fundamental Theorem of Positive Economics (SFTPE).

Oil Price Shock, Pass-through Policy and its Impact on India

NIPFP Working Paper 99
[PDF]


N R Bhanumurthy, Surajit Das and Sukanya Bose
March 2012

Abstract

This paper analyses the impact of transmission of international oil prices and domestic oil price pass-through policy on major macroeconomic variables in India with the help of a macroeconomic policy simulation model. Three major channels of transmission viz. import channel, price channel and fiscal channel are explored with the help of a comparative static macroeconomic general equilibrium framework. The policy option of deregulation of domestic oil prices in the scenario of occurrence of a one-time shock in international oil prices as well as no oil price shock situation analysed through its impact on growth, inflation, fiscal balances and external balances during the 12th Plan period of 2012-13 to 2016-17. The simulation results indicate that the deregulation policy as such would have adverse impact on the growth as well as on the inflation. But if this policy is complemented with the policy of switching of subsidy bill to capital expenditure might result in positive growth effects only in the medium term. Given, the current pass-through policy, one-time oil shock has more intense adverse impact on growth and inflation in the year of shock while it mitigates slowly over time. The model shows that with the oil shock and with current partial pass-through regime, a 10% rise in oil prices result in a 0.6 per cent fall in growth while in the full pass-through situation, it can reduce the growth by 0.9 per cent. Overall, the paper argues that the pass-through has differential impact on growth and inflation over the 12th Plan period. Hence, the policy of oil price deregulation must be carefully weighed and prioritized.