Modeling India’s External Sector: Review and Some Empirics

NIPFP Working Paper 138
[PDF]

N. R. Bhanumurthy, Sukanya Bose and Swayamsiddha Panda
May 2014

Abstract

In the aftermath of global food & fuel price spikes and the recent global financial crisis, understanding of external sector behaviour has become crucial. More specifically, the transmission mechanism of external sector shocks to domestic macroeconomic variables is essential for undertaking relevant policies to mitigate adverse impact of such shocks. Here an attempt has been made to review the theoretical and empirical issues relating to India’s external sector behaviour and present a suitable analytical framework for macro modeling.

Dependence of States on Central Transfers: State-wise Analysis

NIPFP Working Paper 137
[PDF]

C. Bhujanga Rao and D. K. Srivastava
May 2014

Abstract

This paper examines the dependence of states on central fiscal transfers. The pattern of dependence of states on central transfers is studied with respect to five groups of states, namely, high, middle and low income general category states and two groups of special category states categorized into high and low income states. We make a distinction between transfers that are in the form of an entitlement like states’ share in central taxes or statutory grants vis-a-vis transfers that are discretionary and depend on centre’s decisions. In terms of groups of states, the extent of dependence is relatively quite high for the special category states and the low income states. The extent of dependence was lowest during the period covered under the Tenth Finance Commission period. It has since increased, for all states considered together, by about 3.5 percentage points, from 37.4 percent to 40.9 percent of states’ revenue receipts. This increase comes both from entitlement transfers and discretionary transfers to the extent of 2.1 and 1.3 percentage points, respectively.

Exploring policy options to include petroleum, natural gas and electricity under the Goods and Services Tax regime in India

NIPFP Working Paper 136
[PDF]

Sacchidananda Mukherjee and R. Kavita Rao
May 2014

Abstract

The study analyses the impact of keeping crude petroleum, natural gas, motor spirit (gasoline/ petrol), high speed diesel (diesel), aviation turbine fuel (ATF) and electricity out of the Value Added Tax (VAT) scheme. Specifically, the study finds that keeping these items out of the input tax credit mechanism (either partially or fully) would result in cascading. Through an input-output framework, this study proposes some alternatives to the proposed design of GST and assesses the implications for cascading and prices. It captures the degree of cascading across 48 sectors under different scenarios and explores alternative policy options to phase out under-recoveries of oil market companies on account of sales of diesel and petrol under the administered pricing mechanism.

Room at the Top: An Overview of Fiscal Space, Fiscal Policy and Inclusive Growth in Developing Asia

NIPFP Working Paper 135
[PDF]

Rathin Roy
April 2014

Developmental Disability Index for Hill States in India

NIPFP Working Paper 134
[PDF]

Rita Pandey and Purnamita Dasgupta
April 2014

Action Plan on Base Erosion and Profit Shifting an Indian Perspective

NIPFP Working Paper 133
[PDF]

R. Kavita Rao and D. P. Sengupta
March 2014

Abstract

The discussion in this paper highlights some evidence to support the notion that there is base erosion in India. On the specific action points listed in the OECD's Action Plan, a perspective from India’s stand point has been presented along with a brief discussion on the steps needed to prepare for complying with likely proposed measures.

Direct and Indirect use of Fossil Fuels in Farming: Cost of Fuel-price Rise for Indian Agriculture

NIPFP Working Paper 132
[PDF]

Mukesh Anand
February 2014

Abstract

A hornet’s nest could be an apt simile for fossil fuel prices in India. Over years a policy maze has evolved around it, with sharply diverging influence on disparate constituencies.1 We estimate the increase in total cost of farming as a multiple of direct input costs of fossil fuels in farming. Over the period between 1990-1 and 2010-1, direct use of fossil fuels on farms has risen and there is also increasing indirect use of fossil fuels for non-energy purposes. Consequently, for Indian agriculture both energy intensity and fossil fuel intensity are rising. But, these are declining for the aggregate Indian economy. Thus, revision of fossil fuel prices has acquired greater significance for Indian agriculture than for the remainder of the economy. We validate these findings by utilising an input-output table for the Indian economy to assess the impact of fossil fuel price increase. We assess that fossil fuels sector has strong forward linkages and increase in its price has a steep inflationary impact. Using a three-sector I-O model for Indian economy, we estimate that a 10 per cent increase in fossil fuel price could cause, mutatis mutandis, the wholesale price index (WPI) to rise about 4.3 percentage points with 0.7 percentage points being contributed by the farm sector alone.