Article

Fiscal Rules in India: are they Effective?

Willem H. Buiter and Urjit R. Patel

in The Oxford Handbook of the Indian Economy

Published in print March 2012 | ISBN: 9780199734580
Published online November 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780199734580.013.0021

Series: Oxford Handbooks

Fiscal Rules in India: are they Effective?

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This article considers India's experience with fiscal (responsibility) rules during the past decade. The article first provides an analytical foundation on how to think about debt sustainability in the Indian context. It argues that the fiscal space “vacated” in recent years by states has been usurped by the central government. The recommendations of the 13th Finance Commission regarding a roadmap for fiscal consolidation are also examined numerically—something that would be useful to policy makers. Some of the dimensions along which the assessment of fiscal rules takes place—for fiscal policy in Indian going forward—include scope for eliciting time-consistent behavior, features that encourage countercyclical behavior and safeguards against political opportunism.

Keywords: fiscal rules; debt sustainability; Indian economy; Finance Commission; fiscal consolidation; political opportunism

Article.  14380 words. 

Subjects: Economics ; Economic Development and Growth ; Health, Education, and Welfare

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