Integrating Time in Public Policy: Any Evidence from Gender Diagnosis and Budgeting

NIPFP Working Paper 127
[PDF]

Lekha Chakraborty
October 2013

Abstract

Incorporating time in public policy making is an elusive area of research. Despite the fact that gender budgeting is emerging as a significant socio-economic tool to analyze the fiscal policies to identify its effect on gender equity, the integration of time use statistics into this process remain partial or even nil across countries. If gender budgeting is predominantly based on the indexbased gender diagnosis, a relook into the construction of the gender (inequality) index is relevant. This is significant to avoid a partial capture of gender diagnosis in the budget policy making. The “Hard-to-Price” services are hardly analysed for public policy making. The issue is all the more revealing, as the available gender (inequality) index so far has not integrated time use statistics in its calculations. From a public finance perspective, gender budgeting process often rest on the assumption that mainstream expenditure such as public infrastructure is non rival in nature and applying gender lens to these is not feasible. This argument is refuted by the time budget statistics. The time budget data revealed that this argument is often flawed, as there is intrinsic gender dimension to the non-rival expenditure.

Fiscal Multipliers for India

NIPFP Working Paper 125
[PDF]

Sukanya Bose and N R Bhanumurthy
September 2013

Abstract

This paper attempts to present a framework for the estimation of fiscal multipliers for the Indian economy in the structural macroeconomic modelling tradition. Empirical estimates of short-run multipliers are obtained by giving shocks to a range of fiscal instruments - expenditures and taxes. As per our estimates, the values of capital expenditure multiplier, transfer payments multiplier and other revenue expenditure multiplier are 2.45, 0.98, and 0.99, respectively, while the tax multipliers are in the range of -1. Expenditure multipliers were also obtained in the presence of fiscal consolidation targets. These estimates again point to the strong multiplier effect of capital expenditure on output, and underscore the need to prioritize capital expenditure.

Foreign investment in the Indian Government bond market

NIPFP Working Paper 126
[Link]

Ila Patnaik, Sarat Malik, Radhika Pandey and Prateek
September 2013

Abstract

A country witnesses currency exposure when locals hold a large amount of unhedged foreign currency denominated debt. However, India's capital controls continue to be guided by concerns about debt and its maturity, rather than its currency denomination. Even though the there is foreign appetite for rupee denominated debt, India has placed many restrictions on foreign investment in rupee denominated bonds. These include caps on the total as well as limits by investor class, maturity and issuer and have been implemented through a complicated mechanism for allocation and reinvestment. This paper presents the logic and rationale for why these restrictions fail to meet the objectives of economic policy today. It recommends removal of quantative restrictions on foreign holding of Indian rupee denominated debt and suggests ways to move to a more efficient framework.

The investment technology of foreign and domestic institutional investors in an emerging market

NIPFP Working Paper 124
[Link]

Ila Patnaik and Ajay Shah
June 2013

Abstract

We compare the investment technology of foreign versus domestic investors with a focus on decomposing outcomes attributable to asset allocation and security selection. We document significant differences in exposure to systematic asset pricing factors between foreign and domestic investors. A quasi-experimental strategy is introduced, for comparing security selection after controlling for differences in asset allocation. Our results show that foreign investors in India fare poorly at security selection, while domestic investors fare well.

Improving Public Financial Management in India: Opportunities to Move Forward

NIPFP Working Paper 123
[PDF]

Pratap Ranjan Jena
April 2013

Abstract

In recent years the role of a sound PFM system to achieve the objectives of fiscal discipline, strategic planning, and improved service delivery has been getting increasing public attention in India. Since public financial management reforms undertaken intermittently over the years, have not delivered anticipated results in these areas, studies and recommendations of Government appointed committees and expert bodies have identified gaps that need attention to strengthen the PFM institutional framework and to improve the efficiency of government spending. This paper examines key PFM reform measures undertaken in India over the past few years and provides suggestions to enhance the effectiveness of these PFM systems.

Fiscal Reforms, Fiscal Rule and Development Spending: How Indian States have Performed?

NIPFP Working Paper 122
[PDF]

Pinaki Chakraborty and Bharatee Bhusana Dash
April 2013

Credit constraints, productivity shocks and consumption volatility in emerging economies

NIPFP Working Paper 121
[Link]

Rudrani Bhattacharya and Ila Patnaik
March 2013

Abstract

How does access to credit impact consumption volatility? Theory and evidence from advanced economies suggests that greater household access to finance smooths consumption. Evidence from emerging markets, where consumption is usually more volatile than income, indicates that financial reform further increases the volatility of consumption relative to output. We address this puzzle in the framework of an emerging economy model in which households face shocks to trend growth rate, and a fraction of them are credit constrained. Unconstrained households can respond to shocks to trend growth by raising current consumption more than rise in current income. Financial reform increases the share of such households, leading to greater relative consumption volatility. Calibration of the model for pre and post financial reform in India provides support for the model's key predictions.

Emerging Economy Business Cycles: Financial Integration and Terms of Trade Shocks

NIPFP Working Paper 120
[Link]

Rudrani Bhattacharya, Ila Patnaik and Madhavi Pundit
March 2013

Abstract

This paper analyses the extent to which financial integration impacts the manner in which terms of trade affect business cycles in emerging economies. Using a small open economy model, we show that as capital account openness increases in an economy that faces trade shocks, business cycle volatility reduces. For an economy with limited financial openness, and a relatively open trade account, a model with exogenous terms of trade shocks is able to replicate the features of the business cycle.

Fiscal Imbalances and Indebtedness Across Indian States: Recent Trends

NIPFP Working Paper 119
[PDF]

Tapas K. Sen and Santosh K. Dash
February 2013

Does Political Competition Influence Human Development? Evidence from the Indian States

NIPFP Working Paper 118
[PDF]

Bharatee Bhushan Dash and Sacchidananda Mukherjee
February 2013

Abstract

Recently, it has been argued that political competition may have similar effects on economic performance as market competition. This study empirically examines this proposition by linking political competition with the Human Development Index (HDI) of the Indian states. The findings suggest that politically competitive governments perform well along the HDI. A more detailed analysis also shows that the rural India benefits the most from the intense political competition as compared to urban India. We also found that if the same government rules a state for a relatively longer period, it helps the state in achieving higher HDI score. Increasing voter participation found to be positively associated with HDI score, but this finding is confined to the sample of major Indian states only. Increasing public spending on developmental activities is also found to have a positive and significant effect on HDI performance. These findings are robust to various forms of sensitivity analyses.

Negative Influence of Fiscal Subsidies on Environment: Empirical Evidence from Cross-Country Estimation

NIPFP Working Paper 117
[PDF]

Sacchidananda Mukherjee and Debashis Chakraborty
January 2013

Abstract

It has been observed that a number of developed as well as developing countries provide subsidies to their resource-intensive sectors like agriculture, fisheries, manufacturing etc. However, overproduction and consequent pollution as well as overexploitation of natural resources resulting from the provision of input and output subsidies have been a serious threat to environmental sustainability. An area of concern is that subsidies with potentially harmful environmental impacts are not declining in the recent period, despite the ongoing negotiations through the WTO framework and the UN forums. The present analysis attempts to understand the role of government budgetary subsidies on the overall environmental performance through panel data model estimation for a set of seventy four countries over an eleven year period (2000-2010). The empirical findings confirm that a positive relationship between subsidies and environmental degradation exists in a cross-country framework. The analysis notes that the failure to contain provision of subsidies through timely conclusion of the Doha Round negotiations is also posing a serious threat to the global climate change related concerns.

Comovement in business cycles and trade in intermediate goods

NIPFP Working Paper 116
[PDF]

Madhavi Pundit
January 2013

Abstract

Positive correlation between intermediate goods trade and business cycle comovement raises the question of causality. Existing theories propose the direction from trade to comovement, but don't explain positive correlation of trade with TFP comovement, also in the data. My model predicts both positive correlations, and explains potential causality in the reverse direction, i.e. countries might choose trade partners based on business cycle properties. There is greater benefit in trading with positively correlated sources and self-insuring through capital accumulation, when constrained by domestic technology. I provide empirical evidence of this condition by estimating the elasticity of substitution between capital and intermediates.

Does Weak Rupee Matter for India’s Manufacturing Exports?

NIPFP Working Paper 115
[PDF]

N. R. Bhanumurthy and Chandan Sharma
January 2013

Abstract

The role of weak exchange rate in stimulating exports is a foregone conclusion both at the theoretical as well as in empirical literature. This is more so in many of the emerging economies that are pursuing export-led growth strategy and led to currency intervention to contain any appreciation. In this context, this paper tries to empirically re-examine this issue in India as the recent trends does not suggest such relation between exports and exchange rate. The analysis is undertaken at two levels: at macro-aggregate level by using some time series models; and at the micro-firm level from the Indian manufacturing industries. At the macro level, by using both annual and monthly data, this study finds that exchange rate does not have theoretical (positive) relationship with exports. Rather it finds a negative relationship, which is unconventional. Further, it is also found that imports and the import tariffs playing a major role in boosting exports growth in India, thus indicating ‘import-led exports growth’ mechanism. Subsequently, the paper examines the relationship between exports, imports, exchange rate and productivity using a panel of firms from the Indian manufacturing industries. Results indicate that, although imports and exports are inter-linked, import intensity, rather than exchange rate, is a major factor in boosting exports as well as productivity. Hence, this paper argues against currency intervention to maintain weak exchange rate as a policy option for export promotion. Rather, as exchange rates have differential impacts, we argue for sectoral policies, instead of exchange rate intervention, for enhancing productivity and, hence, exports in manufacturing sector.

Property Tax System in India: Problems and Prospects of Reform

NIPFP Working Paper 114
[PDF]

M. Govinda Rao
January 2013

The Global Financial Crisis and Indian Banks: Survival of the Fittest?

NIPFP Working Paper 113
[PDF]

Barry Eichengreen and Poonam Gupta
December 2012

Abstract

The Indian banking system was initially thought to be insulated from the global financial crisis owing to heavy public ownership and cautious management. It was thus a surprise when some banks experienced a deposit flight, as depositors shifted their money toward government-owned banks and specifically toward the State Bank of India, the largest public bank. While there was some tendency for depositors to favour healthier banks and the banks with more stable funding, the reallocation of deposits toward the State Bank of India in particular cannot be explained by these factors alone. Nor can it be explained by the impact of explicit capital injections by the government into some public-sector banks. Rather it appears that the implicit guarantee of the liabilities of the country’s largest public bank dominated other considerations.

The Real Exchange Rate and Export Growth: Are Services Different?

NIPFP Working Paper 112
[PDF]

Barry Eichengreen and Poonam Gupta
December 2012

Abstract

We consider the determinants of exports of services, distinguishing between modern and traditional services. We consider both the growth of export volumes and so-called export surges – periods of rapid sustained export growth. We ask whether the determinants of export growth rates and surges differ between merchandise, traditional services and modern services and whether developing countries are different. Our findings confirm the importance of the real exchange rate for export growth. We find that the effect of the real exchange rate is even stronger for exports of services than exports of goods; it is especially strong for exports of modern services. While the evidence of differential effects between advanced and developing countries is weaker, our results nonetheless suggest that as developing countries shift from exporting primarily commodities and merchandise to exporting traditional and modern services in the course of their development, appropriate policies toward the real exchange rate become even more important.