Has India Emerged? Business Cycle Facts from a Transitioning Economy

NIPFP Working Paper 88
[Link]

Chetan Ghate, Radhika Pandey, and Ila Patnaik
April 2011

Abstract

This paper presents a comprehensive set of stylised facts for business cycles in India from 1950-2009. We find that the nature of the business cycle has changed dramatically after India's liberalisation reforms in 1991. In particular, after the mid 1990s, the properties of India's business cycle has moved closer in key respects to select advanced countries. This is consistent with India's structural transformation from a pre-dominantly agricultural and planned developing economy to a more market based industrial-income economy. We also identify in what respects the behavior of the Indian business cycle is different from that of other advanced economies, and closer to that of other less developed economies. This is the first exercise of this kind to generate an exhaustive set of stylised facts for India using both annual and quarterly data.

Did the Indian Capital Controls Work as a Tool of Macroeconomic Policy?

NIPFP Working Paper 87
[Link]

Ila Patnaik and Ajay Shah
April 2011

Abstract

In 2010 and 2011, there has been a fresh wave of interest in capital controls. India is one of the few large countries with a complex system of capital controls, and hence offers an opportunity to assess the extent to which these help achieve goals of macroeconomic and financial policy. We find that the capital controls were associated with poor governance, were unable to sustain the erstwhile exchange rate regime, and did not support financial stability. India's experience is thus inconsistent with the revisionist view of capital controls. Macroeconomic policy in India has moved away from the erstwhile strategies, towards greater exchange rate flexibility combined with capital account liberalisation.

Panchayats and Economic Development

NIPFP Working Paper 86
[PDF]

M. Govinda Rao and T.R. Raghunandan
March 2011

Stimulus, Recovery and Exit Policy G20 Experience and Indian Strategy

NIPFP Working Paper 85
[PDF]

Sudipto Mundle, M. Govinda Rao and N. R. Bhanumurthy
March 2011

Federalism and Fiscal Reform in India

NIPFP Working Paper 84
[PDF]

M. Govinda Rao and Tapas K. Sen
February 2011

Abstract

This paper attempts to analyse the experience of incentivising economic reforms at the state level through central transfers to states. It reviews the experiences of the central government introducing incentives for reform directly through various specific purpose transfers as well as the incentive schemes recommended by various Finance Commissions. The incentive schemes directly introduced by the central government include, accelerated irrigation benefit programme, accelerated power development and reform programme, Jawaharlal Nehru Urban Renewal Mission, education and health sector reforms. The reforms recommended by the Finance Commissions include incentivising tax reforms and fiscal restructuring and consolidation.

The review of the experiences of Indian fiscal federalism shows that the incentivising reforms have neither been an unqualified success nor have they been a total failure. There are interesting lessons to be learnt from the experiences for both designing the incentive schemes and implementing them. The paper summarises the lessons of experience. While incorporating these in designing and implementing incentive schemes can be useful in the short and medium term, what matters in the long run is the political incentive for reforms.

How to Measure Inflation in India?

NIPFP Working Paper 83
[PDF]

Ila Patnaik, Ajay Shah and Giovanni Veronese
February 2011

Abstract

What is the best inflation measure in India? What inflation measure is most relevant for monetary policy making in India? Questions of timeliness, weights in the price index, accuracy of food price measurement, and inclusion of services prices are relevant to the choice of measure. We show that under present conditions of measurement, the Consumer Price Index for Industrial Workers (CPI-IW) is preferable to either the Wholesale Price Index or the GDP deflator.

Indian Social Democracy: The Resource Perspective

NIPFP Working Paper 82
[PDF]

Vijay Kelkar and Ajay Shah
February 2011