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Ashok Kotwal
On demonetisation
Posted on: 23 Dec 2016
On the evening of 8 November, the Prime Minister announced on national television that Rs. ... read on »
Introduction to e-Symposium: The GDP conundrum
Posted on: 16 Nov 2016
Ever since India’s Central Statistical Organisation came out with the new GDP series with ... read on »
Introduction to e-Symposium: The idea of a universal basic income in the Indian context
Posted on: 26 Sep 2016
The idea of an unconditional basic income given to all citizens by the State, has caught o ... read on »
Debate: The Aadhaar Bill
Posted on: 02 May 2016
In a debate on the Aadhaar Bill, commentators from academia and civil society will ... read on »

Topic: Macroeconomic Policy

Are farm loan waivers really so bad?
Pronab Sen
Posted on: 23/06/2017 09:41:50

Recent announcements by various state governments of their intent to waive farm loans to varying extents have been strongly criticised by the media and other commentators. In this article, Dr Pronab Sen examines the validity of the claims on which this opposition is based.
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When windmills tilt: The FRBM debate
Pronab Sen
Posted on: 08/05/2017 09:42:52

In this article, Dr Pronab Sen presents his views on the ongoing debate on the Fiscal Responsibility and Budget Management Act.
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How India can reduce the size of its black economy
Parag Waknis
Posted on: 20/03/2017 09:43:47

In this article, Parag Waknis contends that if the Indian government is serious about addressing the black economy, fundamental changes in the structure and organisation of the economy and politics are required.
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Budget subsidies of the central government and 14 major Indian states: 1987-88 and 2011-12
Sudipto Mundle , Satadru Sikdar
Posted on: 14/03/2017 09:41:01

This column presents estimates of the flow of subsidies through the budgets of the central government and 14 major Indian states in 1987-88 and 2011-12. The estimates show that the overall level of subsidies relative to GDP has declined, as has the share of non-merit subsidies. This suggests some improvement in efficiency in this aspect of public expenditure.
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Chasing one’s own tail: Dealing with tax non-compliance
Sangram Gaikwad , Kailash Pundlik Gaikwad
Posted on: 01/03/2017 09:47:29

A key, stated objective of the recent denotification of high-denomination currency notes was to eliminate black money arising from tax evasion, and to expand the tax net. In this article, Sangram Gaikwad and Kailash Gaikwad, officers of the Indian Revenue Service, outline the challenges faced by the tax administration in dealing with rampant evasion in direct taxation, and what can be done to address the issue.
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Reviving the informal sector from the throes of demonetisation
Kaushik Bhattacharya , Siddhartha Mitra , Sarmistha Pal , Bibhas Saha
Posted on: 13/02/2017 09:43:56

While recent measures announced by the government indicate some awareness of the hardships inflicted on the informal sector by the note ban, more needs to be done. In this article, Bhattacharya, Mitra, Pal and Saha summarise the emerging evidence on the significant adverse impact of demonetisation on the informal sector, and suggest policy measures to ensure a steady recovery.
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Union Budget 2017-18: No amends for the sins of demonetisation
Siddharth Varadarajan
Posted on: 06/02/2017 17:21:27

Commenting on India’s Union Budget 2017-18, Siddharth Varadarajan, a Founding Editor of The Wire, contends that dealing with the aftereffects of demonetisation requires a fiscal and monetary boost, but the government appears to be in no mood to deliver it. In his view, this is because the fiscal cushion that demonetisation was supposed to provide never materialised.
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India’s Union Budget 2017-18: Status quo for the social sector
Yamini Aiyar
Posted on: 03/02/2017 11:46:30

On 1 February, The Finance Minister of India presented the Union Budget 2017-18. In this article, Yamini Aiyar, Director of Accountability Initiative, contends that for social policy, the Budget suggests more continuity than radical change in India’s welfare architecture. However, it lacks a coherent vision for health and education.
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An economist’s view on recent domestic and world events
Dilip Mookherjee
Posted on: 31/01/2017 19:18:19

Dilip Mookherjee spoke to Hindu Business Line at length on a variety of issues including demonetisation, the upcoming Budget, and the Trump Presidency’s impact on the world economy.
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How to go about chasing black money
Indira Rajaraman
Posted on: 30/01/2017 10:21:44

In the context of demonetisation, Indira Rajaraman argues that the focus of any sustainable reform of the taxation structure must be on reducing flows of tax evasion, not going after existing caches of black money.
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Reconsidering the 4% inflation target
Gurbachan Singh
Posted on: 16/01/2017 09:44:46
Tags:   inflation


The RBI targets an inflation rate of 4%. In this article, Gurbachan Singh takes an in-depth look at the prevailing macroeconomic policy regime. This exercise provides an insight, which forms the basis for an alternative policy regime under which it is makes sense to target a lower inflation rate.
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Aadhaar, demonetisation, and the poor
Silvia Masiero
Posted on: 09/01/2017 10:01:26

There is a view that an Aadhaar-centred apparatus of digital inclusion can shield the poor from the problematic effects of demonetisation. In this article, Silvia Masiero argues that constraints of technology ownership, access to informational networks, and infrastructural readiness prove the argument wrong. Other means are needed to reduce the severe humanitarian consequences of sudden cashlessness.
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Assessing the impact of demonetisation through the gender lens
Mitali Nikore
Posted on: 04/01/2017 09:49:44

In this article, Mitali Nikore, Senior Consultant at PwC India, highlights how demonetisation is impacting women differentially, and offers policy suggestions on how the negative effects can be mitigated.
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On demonetisation
Parikshit Ghosh
Posted on: 23/12/2016 11:16:28

On the evening of 8 November, the Prime Minister announced on national television that Rs. 1,000 and 500 notes are no longer legal tender, and must be exchanged at the banks for newly issued currency. This major policy intervention has sparked a country-wide debate. Will it curb black money? Is it going to nudge us towards a cashless society? How much will be the collateral damage from the liquidity shock and is it a price worth paying?

Ideas for India is following the issue closely. A lot of commentary has already appeared on our pages and more will be forthcoming. This page collects together all the articles we have posted on demonetisation, in reverse chronological order.

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Demonetisation: A thunderbolt in search of a target
Ajit Karnik
Posted on: 23/12/2016 09:22:25

In this article, Ajit Karnik, Professor of Economics at Middlesex University, Dubai, examines the various rationales that have been trotted out to justify demonetisation and finds little evidence to back these up. In his view, this seems to have been done mainly because a dramatic gesture was required to keep the supporters of the current government enthused.
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Post-demonetisation: Can the old notes return?
Badri Sunderarajan
Posted on: 22/12/2016 09:37:49

Banks in India are reported to have received about 87.7% of the demonetised currency notes so far. In this article, Badri Sunderarajan argues that when once all the old notes have come in, it would make sense to reintroduce them into the system as legal tender.
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India’s demonetisation drive: Politics trumps economics
Siddhartha Mitra
Posted on: 20/12/2016 09:39:10

In this article, Siddhartha Mitra, Professor of Economics at Jadavpur University, argues that even though demonetisation fails the standard economic cost-benefit test with regard to its stated objectives, it may still make for sound political arithmetic.
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Demonetisation: Some very counterintuitive effects in practice
Gurbachan Singh
Posted on: 18/12/2016 09:09:25

Due to demonetisation, holders of black money lose if they cannot exchange their notes or sell these in the black market. It is widely reasoned that this implies an equal financial gain for the public authorities. In this article, Gurbachan Singh shows that this logic is flawed.
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Will demonetisation lead to a protracted economic slowdown?
Radhika Pandey , Rajeswari Sengupta
Posted on: 15/12/2016 09:30:09

In this article, Pandey and Sengupta argue that the impact of the contractionary demand shock triggered by the note ban will gradually radiate from cash-intensive activities to virtually every sector of the economy.
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The demonetisation boondoggle
Amartya Lahiri
Posted on: 04/12/2016 03:07:56

In this article, Amartya Lahiri, Professor of Economics at the University of British Columbia, argues that all public policy must rely on a clear-headed cost-benefit analysis and the recent demonetisation move fails the test.
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Why Demonetisation?
Sarmistha Pal
Posted on: 01/12/2016 09:25:38

In this article, Sarmistha Pal, Chair in Financial Economics at the University of Surrey, examines whether the current government’s stance in tackling black money has significantly differed from its predecessor, and how far it is willing to go in this respect.
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Demonetisation and agricultural markets
Nidhi Aggarwal , Sudha Narayanan
Posted on: 30/11/2016 12:03:41

In this article, Aggarwal and Narayanan contend that demonetisation alone cannot turn agricultural markets cashless. Such a shift would require sustained and focussed effort to expand the reach of formal institutions, especially for credit and storage.
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Consequences of the demonetisation shock
Sudipto Mundle
Posted on: 29/11/2016 00:41:17

In this article, Sudipto Mundle, Emeritus Professor at NIPFP, contends that we are likely to see a significant dip in economic activity till January 2017 or even till the end of the current financial year because of the disruptive demonetisation shock.
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Notes ban: Modinomics vs. Moditics
Maitreesh Ghatak
Posted on: 23/11/2016 00:01:18

Maitreesh Ghatak, Professor of Economics at the London School of Economics, contends that while the ban on high-denomination currency notes is bad economics, it is a brilliant political move.
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Demonetisation and rural cooperative banks
Ajay Vir Jakhar
Posted on: 22/11/2016 09:24:45

The RBI has barred rural cooperative banks from exchanging or accepting the denotified Rs. 1,000 and 500 notes. In this article, Ajay Vir Jakhar of Bharat Krishak Samaj - a non-partisan association of farmers - argues that if rural cooperative banks sink, so will farmers.
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A monetary economics view of the demonetisation
Ajay Shah
Posted on: 21/11/2016 00:35:05

The demonetised Rs. 1,000 and 500 notes were 86% of the total volume of cash in India. In this article, Ajay Shah, Professor at NIPFP, argues that if a significant scale of firm failure were to come about, it would convert a temporary shock into a deeper and more long-term recession.
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Going cashless but thinking cash?
Bappaditya Mukhopadhyay
Posted on: 20/11/2016 09:20:56

In this article, Bappaditya Mukhopadhyay, Professor of Economics and Finance at the Great Lakes Institute of Management, contends that switching from a predominantly cash-based to cashless economy needs a positive, exogenous shock and the recent currency ban could be the perfect opportunity for that. To give India’s cashless economy the push it needs, the government could allow mobile and other digital payment platforms to accept deposits in demonetised notes.
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Picking up the pieces
Pronab Sen
Posted on: 18/11/2016 10:00:00

In an earlier article , Pronab Sen, Country Director, IGC India Central, examined some of the economic consequences of the recent demonetisation of Rs. 1,000 and 500 notes in India, and concluded that the potential damage could be substantial, both in terms of growth and equity.

In this article, focussing on solutions, he contends that the government now needs to realise that credit for production purposes is at least as, if not more, important than providing liquidity for consumption.

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Policymaking in the ‘grey zone’?
Prerna Mukharya
Posted on: 17/11/2016 09:30:00

Prerna Mukharya, Founder of Outline India – a social enterprise that focuses on data collection, impact assessments and evaluation studies, predominantly working with rural populations in remote areas – discusses the impact of the currency ban on their work.
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A macro view of India’s currency ban
Rajeswari Sengupta
Posted on: 15/11/2016 01:24:33

The recent ban on high-value currency notes has taken the country by storm. While much is being written about the pros and cons of this announcement in terms of the effect on black money, logistical costs, and the immediate inconvenience faced by the public, there is little or no discourse on the macroeconomic implications. In this article, Rajeswari Sengupta, Assistant Professor of Economics at IGIDR, discusses the impact of this move on money supply, output and prices, in the short- and medium-term.
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Shock and oh damn
Pronab Sen
Posted on: 14/11/2016 08:35:29

In this article, Pronab Sen, Country Director for the India Central Programme of the International Growth Centre, argues that India’s recent demonetisation has penalised virtually the entire informal sector, and perhaps damaged it permanently.
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A closer look at demonetisation
Gurbachan Singh
Posted on: 13/11/2016 03:43:04

In this article, Gurbachan Singh contends that black money and white money are simplistic concepts; there is a grey area as well. In his view, the economic effects of demonetisation in terms of real estate, seigniorage, and political funding are complex. The measure can be useful in curbing black money only if supplemented by other policies on a sustained basis.
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Currency shock: Does the gain justify the strain?
Parikshit Ghosh
Posted on: 11/11/2016 09:19:40

On the evening of 8 November, PM Modi announced that 1,000 and 500 rupee notes will cease to be legal tender post-midnight. In this article, Parikshit Ghosh, Associate Professor of Economics at the Delhi School of Economics, contends that there are bigger, juicier and relatively low-hanging fruit the government is not reaching for, in the fight against black money.
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A universal basic income to step up economic reform
Nimai Mehta
Posted on: 28/10/2016 09:45:46

In this article, Nimai Mehta, Academic Director of the Global Economics and Business Program at the American University, highlights the political challenge of introducing the wider set of reforms needed if a universal basic income (UBI) is to lift the poor out of poverty, and of ensuring fiscal affordability of UBI. Further, he shares some initial ideas on how these objectives may be achieved by leveraging the evolving Centre-state relations.

Tweet using #basicincome

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Universal basic income for India
Vijay Joshi
Posted on: 21/10/2016 14:00:42

In this article, Vijay Joshi, Emeritus Fellow of Merton College, University of Oxford, sets out his proposal for a universal basic income (UBI) in India. He contends that ´deep fiscal adjustment´, in combination with UBI, would make a huge positive difference to the lives of people, present and future, and provide an essential underpinning for the acceptability of radical economic reform.

Tweet using #basicincome

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Are grain procurement shocks inflationary?
Chetan Ghate , Sargam Gupta , Debdulal Mallick
Posted on: 17/10/2016 09:29:05

Central banks in emerging markets grapple with understanding the inflationary impact of grain procurement shocks because the precise link between the agriculture sector and the rest of the economy may not be well understood. This column presents a framework to understand how the government’s grain procurement policy in India can be inflationary, and what the appropriate monetary policy response should be.
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The tussle between RBI and Ministry of Finance: A different dimension
Gurbachan Singh
Posted on: 18/08/2016 09:36:28

The popular belief about the tussle between RBI and the Ministry of Finance is that it is an issue of the trade-off between inflation and economic growth, with the former more focussed on controlling high inflation and the latter emphasising high growth. However, according to Gurbachan Singh, there is a different dimension to the story; the Ministry doesn’t fully appreciate that RBI cannot ignore market forces while making announcements about interest rates.
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Is India a tax haven for the rich?
Himanshu
Posted on: 10/08/2016 09:57:32

In April, the government released tax data, which provided a break-up of taxes by income categories for the year 2012-13. In this article, Himanshu, Associate Professor at Jawaharlal Nehru University, contends that by increasing tax exemptions and subsidies for the wealthy, and through various tax giveaways, the government has reduced its capacity to spend more on essential sectors such as health, nutrition and education.
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Public sector banks: The more things change, the more they stay the same
Gurbachan Singh
Posted on: 21/07/2016 01:11:48
Tags:   banking


Banks Board Bureau has been set up to help the government appoint heads of public sector banks (PSBs) and to advise on important issues in banking. In this article, Gurbachan Singh asks basic questions – what is the rationale for PSBs? Was there a rationale for the nationalisation of banks even in 1969? In his view, privatisation is needed but as a second-best solution, meaningful autonomy can be useful.
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Inflation targeting: A long way to go
Rajeswari Sengupta
Posted on: 18/07/2016 22:44:08

The Finance Bill, 2016, amended the Reserve Bank of India (RBI) Act, 1934, to define inflation targeting as the primary objective of the central bank. In this article, Rajeswari Sengupta, Assistant Professor at IGIDR, contends that to actually become an inflation-targeting central bank, RBI will need to undertake a series of reforms to build institutional capabilities and improve the monetary policy transmission mechanism.
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The Indian banking system: A ticking time bomb
Ashish Pandey
Posted on: 13/05/2016 00:00:00
Tags:   Banking


In response to RBI’s call to accelerate the recognition of stressed assets, publicly traded banks in India added nearly Rs. 1 trillion in bad loans in the quarter ending December 2015. In this article, Ashish Pandey, a finance professional, proposes a multipronged approach to addressing the Non-Performing Assets crisis in the Indian banking system.
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Recapitalising public sector banks by disinvesting in RBI: Right and wrong
Gurbachan Singh
Posted on: 09/05/2016 09:39:43

The Economic Survey 2015-16 put forth the argument that the Government of India could reduce its capital in the RBI from its current large level and use it to increase its capital in public sector banks, which face a capital shortage. RBI Governor Raghuram Rajan has stated that this argument is not valid. In this article, Prof. Gurbachan Singh contends that while the argument does not hold in general, it does so for all practical purposes under the present conditions.
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Union Budget 2016: Will it support India’s economic transformation?
Nirvikar Singh
Posted on: 08/03/2016 09:31:15

In this year’s Budget speech, the Finance Minister articulated the government’s agenda to ‘Transform India’ through a set of economic reforms framed in terms of ‘nine pillars’ - agriculture, rural development, health, education and skilling, infrastructure, financial sector, governance, fiscal discipline, and tax reform. In this article, Nirvikar Singh, Professor of Economics at the University of California Santa Cruz, summarises the highlights of the nine pillars and discusses whether or to what extent this Budget will support India’s economic transformation.
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Union Budget 2016: A UPA-III Budget
Maitreesh Ghatak
Posted on: 04/03/2016 03:03:54

In this article, Maitreesh Ghatak, Professor of Economics at the London School of Economics, contends that the Modi government presented a reasonably good United Progressive Alliance (UPA)-III Budget that tinkers at the margin. However, in his view, minor tweaks may not suffice in the current growth scenario.
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Union Budget 2016: Focus on reforms and fiscal commitments
Rathin Roy
Posted on: 03/03/2016 09:36:56

The Union Budget 2016-17 was presented by the Finance Minister earlier this week. In this article, Rathin Roy, Director of the National Institute of Public Finance and Policy, applauds the Budget for maintaining prudence, enhancing the government’s credibility as a fiscal manager, and initiating important, unglamorous reforms.
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Can India beat this slowdown?
Jayan Jose Thomas
Posted on: 24/02/2016 09:33:10

RBI Governor Raghuram Rajan has cautioned the government against seeking to generate economic growth by increasing public spending and hence, adding to the fiscal deficit. In this article, Jayan Jose Thomas, Associate Professor of Economics at Indian Institute of Technology, Delhi, puts forth the view that the only engine that can pull the Indian economy forward at the moment is government expenditure.
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Fiscal deficit and growth slowdown
Gurbachan Singh
Posted on: 17/02/2016 09:36:11

Ahead of the Union Budget, several policymakers and economists in India have advocated increasing public spending to spur economic growth. In this article, Gurbachan Singh argues that even if India is facing a slowdown, a larger fiscal deficit is not the solution – more so now that RBI and the government have adopted inflation targeting. The prospect of a fiscal crisis may be farfetched but India may be incurring costs differently.
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China’s fitful economic reforms
Eswar Prasad
Posted on: 07/12/2015 09:21:59

Last week, IMF elevated China’s yuan to the status of a global reserve currency. In this article, Eswar Prasad, the Tolani Senior Professor of Trade Policy at Cornell University, contends that the fundamental question China’s policymakers now face is whether they will back up their commitment to financial sector reforms with broader measures that will truly free up markets and support them with a strong institutional foundation.
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Monetary dimensions of the recent Indian inflationary experience
Pronab Sen
Posted on: 12/10/2015 13:57:40

Inflation in India remained at or near double-digit levels between 2009-10 and 2014-15. In this article, Pronab Sen, Country Director, IGC India Central, argues that while the initiation of the inflationary process may have been rooted in structural factors, there is a monetary story to be told about its propagation across commodities and perpetuation over time. This understanding explains RBI’s helplessness and may help in designing appropriate policy interventions for similar inflationary episodes in the future.
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Household savings and India’s current account deficit
Nikhil Gupta
Posted on: 25/09/2015 10:37:28

India’s current account deficit widened consistently in the post-crisis period between 2008-09 and 2012-13. This column finds that while the public sector was the key driver of this trend in the first two years, the increased consumption/investment by households was responsible for the high deficit in the later period. It recommends that policymakers should now incentivise household savings rather than consumption/investments, which implies limited scope for further interest rate cuts.
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India’s monetary policy in unusual times, uncharted waters
Arvind Subramanian
Posted on: 26/08/2015 09:19:10

There is a lot of discussion of the right course of monetary policy for India. In this article, India’s Chief Economic Adviser Arvind Subramanian argues that the country’s real policy interest rates have diverged significantly for consumers and producers, and are unusually high for the latter. There is a clear need for more consideration of the appropriate measure of restrictiveness in these unusual times.
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India’s Monetary Policy Committee: Formation blues
Amartya Lahiri
Posted on: 10/08/2015 09:38:58

The government and RBI are in the process of finalising the structure of India’s Monetary Policy Committee. In this article, Amartya Lahiri, Professor of Economics at the University of British Columbia, makes recommendations for the composition of the committee that would help preserve the independence of the RBI in monetary policy oversight and conduct in form and spirit.
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Charting a course for the Indian economy
Karthik Muralidharan , Arvind Subramanian
Posted on: 05/08/2015 09:56:35

Karthik Muralidharan (Associate Professor of Economics, University of California, San Diego) speaks with Arvind Subramanian (Chief Economic Adviser, Government of India) on a broad set of issues ranging from the uniqueness of the Indian development model, the political economy of reforms, reducing factor misallocation in the economy, enhancing State capacity, financing India´s infrastructure needs, to the implications of the Fourteenth Finance Commission, improving the design of social welfare programmes, and climate change.

This is the third in the series of I4I Conversations.

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How interest rates affect financial decisions of Indian households
Nikhil Gupta
Posted on: 17/07/2015 09:52:35

RBI has cut interest rates three times this year so far. While rate cuts are welcomed by the Indian corporate sector, their impact on households is less discussed. This column analyses the relationship between deposit rates and financial decisions of households. It finds that lower rates reduce net financial savings of households, which in turn reduces the resource pool available to the corporate sector.
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Reining in gold imports
Gurbachan Singh
Posted on: 12/06/2015 00:00:00
Tags:   imports , RBI


In an attempt to reduce gold imports, the Indian government has proposed three new schemes – gold monetisation, sovereign gold bonds, and domestic production of branded gold coins. In this article, Prof. Gurbachan Singh diagnoses the market failure and government failure involved in large gold imports, and provides a broad perspective on the issue. He examines the potential effectiveness of the schemes, and suggests policy alternatives.
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Where is India’s growth story headed?
Ila Patnaik , Madhavi Pundit
Posted on: 25/05/2015 00:00:00

The global financial crisis and domestic policy paralysis led to a decline in firms’ investment activities and investors’ business confidence in India. Could this have affected the economy’s long-term growth? This column contends that institutional capacity for reform and the right policy action can render the negative investment shock temporary, and ensure that the trend growth of output remains strong.
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Responding to external shocks
Ashima Goyal
Posted on: 30/04/2015 00:00:00

Following the global financial crisis of 2007-08, the Indian economy was exposed to various shocks. While the major source of shocks was external, the effects were magnified by certain lapses in domestic policy. This column discusses what policies worked and what did not work to reduce excessive rupee volatility, and how the lessons were applied to prepare for any future shocks.
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The nuances of inflation targeting in India
Abhijit Sen Gupta , Rajeswari Sengupta
Posted on: 16/03/2015 00:00:00

How prepared is India for inflation targeting? This column suggests that the larger weight assigned by the RBI to tackling inflation over the years, relative to other policy objectives such as stabilising exchange rates, places it in a good position to make the transition to the new regime. However, limited control over supply shocks that impact inflation might continue to pose a challenge. Greater coordination between fiscal and monetary policy would improve the efficacy of inflation targeting.
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The 2015-16 Union budget and India’s growth
Nirvikar Singh
Posted on: 04/03/2015 03:25:35

The 2015-16 Union budget – the first full-year budget of the new government – was presented last week. In this article, Nirvikar Singh, Professor of Economics at the University of California Santa Cruz, contends that the budget is a welcome return to transparency and sanity, and has a host of small changes that add up to a promising reform agenda.
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Evaluating the risks of inflation targeting in India
Renu Kohli
Posted on: 03/03/2015 00:00:00

The adoption of flexible inflation targeting by the Indian government and RBI is a landmark change in the country’s monetary policy. In this article, Renu Kohli - a macroeconomic policy specialist - discusses the risks associated with the move. She reasons that the national and global macroeconomic environment and the timing of transition to the new regime are crucial to its success.
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Modi’s economic reforms: Foundation laid but time running out
Eswar Prasad
Posted on: 27/02/2015 00:00:00

Anticipation is running high that the Modi government will announce sweeping economic reforms in their first full-year budget, especially since their tenure so far has been bereft of any dramatic changes. In this article, Eswar Prasad, Senior Professor of Trade Policy, Cornell University, contends that Modi has laid a good foundation for reforms in his first nine months in office. But the hard work still lies ahead and time is running out.
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Targeting nominal GDP
Pranjul Bhandari , Jeffrey Frankel
Posted on: 08/01/2015 00:00:00

Central banks, especially in developing countries, still seek transparent and credible communication. Yet signalling intentions in the conduct of monetary policy sometimes creates undesirable constraints. This column argues that it may be better to phrase central bank pronouncements in terms of nominal GDP, rather than in terms of inflation. If it is worth communicating a plan, it is worth choosing a plan that one can live with.
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India’s macroeconomic outlook
Eswar Prasad
Posted on: 16/12/2014 00:00:00

With falling inflation, high forex reserves and the new government embarking on a broad reform agenda, things seem to be looking up for India. In this article, Eswar Prasad shares his macroeconomic outlook for the economy. He provides his perspective on foreign inflows, disinvestment, fiscal position, the reform agenda, and escaping the low-growth trap.
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Should India embrace inflation targeting?
Iyanatul Islam
Posted on: 12/12/2014 00:00:00

The Urjit Patel Committee recommended the formal adoption of an inflation targeting regime for India. In this article, Iyanatul Islam compares the views of the current RBI Governor with those of his predecessor on controlling inflation. He concludes that, at this stage, the incremental gains for the RBI from fully embracing inflation targeting are likely to be rather modest.
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From tapering to tightening: The impact of the Fed’s exit on India
Kaushik Basu , Barry Eichengreen , Poonam Gupta
Posted on: 27/11/2014 01:09:10
Tags:   US


India was among the hardest hit by the Fed’s ‘taper talks’. This column argues that this impact was large for two reasons. First, India received huge capital flows before. This had made it a convenient target for investors seeking to rebalance away from emerging markets. Second, macroeconomic conditions had worsened, which rendered the economy vulnerable. The measures adopted in response were ineffective in stabilising the financial markets. Implementing a medium-term framework that limits vulnerabilities and restricts spillovers could be more successful.
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The Planning Commission and federal transfers
Antra Bhatt Hakhu
Posted on: 20/11/2014 10:00:00

A key function of the Planning Commission was to allocate financial assistance from the centre to the states in support of the five-year plan. In view of the impending replacement of the Planning Commission, Antra Bhatt Hakhu analyses the nature of federal transfers – both by the Planning Commission and the Finance Commission – during 1990-2010 to derive lessons for the body that will be allocating plan transfers going forward.
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Challenges and priorities for financial sector reform in India
K.P. Krishnan , Nirvikar Singh
Posted on: 17/11/2014 00:00:00

I4I Editor Nirvikar Singh (Professor, University of California, Santa Cruz) interviews K.P. Krishnan (Former Additional Secretary, Department of Economic Affairs, Ministry of Finance) on the central government’s plans and priorities for financial sector reform, and associated challenges. Dr Krishnan provides his perspective on issues including the regulatory architecture, financial inclusion initiatives, strengthening the banking system, and infrastructure financing.
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Building a new house, returning to an original foundation
Jessica Seddon , T. N. Srinivasan
Posted on: 05/11/2014 00:00:00

Most commentators in the Planning Commission debate believe that the new body should be some form of national think-tank focusing on the technical function of formulating an economy-wide strategic vision. In this article, Seddon and Srinivasan argue that the choice of strategic vision is political as well as technical, and make a case for a strengthened Inter-State Council to succeed the Commission and perform both roles.
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Revisiting Indian inflation
Kirti Gupta , Fahad Siddiqui
Posted on: 10/10/2014 00:00:00

Persistently high inflation is a key challenge facing India today. This column analyses long-term trends in Indian inflation and causal factors. It also discusses the current thinking of the RBI on revising and strengthening India’s monetary policy framework.
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In lieu of the Planning Commission: Part V
Ashwini Kulkarni
Posted on: 09/10/2014 00:00:00

In this post, Ashwini Kulkarni, who works with the NGO Pragati Abhiyan in the state of Maharashtra, provides her perspective on some of the issues involved in replacing the Planning Commission. In her view, an institution such as the Planning Commission that is outside of the government ministries but committed to the government, has an important crosscutting role and should be given a statutory status.
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In lieu of the Planning Commission: Part IV
Pronab Sen
Posted on: 30/09/2014 00:00:00

In this post, Pronab Sen – former Principal Adviser, Planning Commission of India – provides his perspective on some of the issues involved in replacing the Planning Commission. In his view, none of the functions that were performed by the Planning Commission are entirely dispensable for any central government in a federal democratic system; the issue is the manner in which they are performed and who performs them.
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In lieu of the Planning Commission: Part III
Sunil Jain
Posted on: 25/09/2014 00:00:00

In this post, Sunil Jain – Managing Editor, Financial Express – provides his perspective on some of the issues involved in replacing the Planning Commission. In his view, the new body should focus on providing advice on policy issues, and undertaking neutral assessment of government policies in the long run. It should not be involved in allocation of funds across levels of government.
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In lieu of the Planning Commission: Part II
Chandrajit Banerjee
Posted on: 19/09/2014 00:00:00

In this post, Chandrajit Banerjee - Director General, Confederation of Indian Industry (CII) - provides his perspective on some of the issues involved in replacing the Planning Commission. In his view, Five Year Plans can be dispensed with, while the function of fund allocation across levels of government and ministries can be undertaken by the Ministry of Finance. He suggests having a group of private sector advisors that can provide feedback to the new body.
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In lieu of the Planning Commission: Part I
Pranab Bardhan
Posted on: 11/09/2014 00:00:00

The Indian government plans to replace the Planning Commission with a more contemporary think tank. Over the next few weeks, we will present views of experts from various stakeholder groups – private sector, civil society, academia, media and the government – on what should be the character and functions of the new body.

In this post, Pranab Bardhan – Professor of Graduate School at the University of California, Berkeley – provides a perspective on some of the issues involved in replacing the Planning Commission. In his view, several functions that were performed by the Planning Commission can now be located in other existing bodies. He outlines the functions that the new body should perform and contends that it needs to be more than just a think tank.

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The future of economic planning in India
Pronab Sen
Posted on: 09/09/2014 00:00:00

Economic planning has been a central tenet of India’s development strategy since independence. In this article, Pronab Sen – former Principal Adviser to the Planning Commission of India – presents his views on the criticisms leveled against Indian planning from time to time, and reflects upon the continuing utility of planning in the future.
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Is the rupee fairly valued?
Martin Kessler , Arvind Subramanian
Posted on: 27/08/2014 00:00:00

Is the rupee fairly valued, and should the RBI allow it to appreciate beyond its current rate? This column analyses new World Bank data and finds that the rupee is persistently undervalued by 30% or more. Given the undervaluation, it is puzzling to note that India runs large, structural current account deficits.
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Goods and Services Tax in India: Challenges and prospects
Govinda Rao
Posted on: 25/08/2014 00:00:00

The Finance Ministry recently announced that the Goods and Services Tax will soon be a reality. In this article, M. Govinda Rao – member of the 14th Finance Commission – discusses the challenges and prospects of transitioning to GST. He contends that given the multitude of stakeholders and contentious issues involved in the negotiations, finalising and operationalising the tax structure will take time, and that it is unrealistic to expect a “flawless” GST.
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The new plan body must have a certain oomph
Abhijit Banerjee
Posted on: 21/08/2014 10:39:42

PM Modi has announced that his government plans to scrap the six-decade old Planning Commission and replace it with a more contemporary think tank. In this article, Abhijit Banerjee outlines the various functions that the Planning Commission has served over the years, and presents his view on the type of alternative that may be able to fit the role.
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Modi’s first Budget for India: Disappointing but retrievable
Arvind Subramanian
Posted on: 15/07/2014 15:43:45

In this article, Arvind Subramanian contends that while Modi’s first Budget was good on vision, it fell short in terms of fiscal adjustment, budgetary transparency and credibility, and specificity and timelines on important policy actions. In his view, these shortcomings are remediable over time as the government forges the required political deals and improves administrative capacity to implement difficult policy actions.
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Two views on the Budget
Eswar Prasad , Bharat Ramaswami
Posted on: 12/07/2014 12:21:50

The Modi government’s first Budget has received a mixed response. Eswar Prasad and Bharat Ramaswami present two distinct views on the Budget. While Prasad is of the opinion that the Budget hits the right notes and emphasises some key policy priorities, Ramaswami believes that a coherent policy and worldview is yet to emerge.
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Keys to successful reform in India
Eswar Prasad
Posted on: 09/07/2014 10:36:33

The new Indian government’s first budget - due to be unveiled this week – will be an important indicator of how forcefully the new PM intends to translate his mandate of putting India’s economy back on track into effective actions. This article contends that both strategy and specifics will be crucial for this budget to effectively kick-start economic reforms.
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The Jaitley Budget: Planning for crisis
Arvind Subramanian
Posted on: 23/06/2014 00:00:00

El Nino can potentially derail the best-laid plans of the new government in India. The article contends that the finance minister would do well to plan his first Budget by attaching a reasonable probability to a food crisis this year. The Budget will need to be as much about creating a basis for successful crisis action later in the year as about launching epochal reforms now.
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The Goods and Services Tax: Light at the end of the tunnel?
Nirvikar Singh
Posted on: 18/06/2014 00:00:00

As the Goods and Services Tax is inching towards implementation, a major overhaul of the Indian tax system has also been in progress. This article discusses three key strengths of the ongoing process, and highlights the merits of introducing GST as early as possible.
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Why food inflation has been high in India
Rudrani Bhattacharya , Narhari Rao , Abhijit Sen Gupta
Posted on: 16/04/2014 00:00:00
Tags:   inflation


The persistently high food inflation witnessed in India over the past few years has been a cause for concern. This column seeks to identify the major drivers of food inflation in India, and to evaluate the extent to which food inflation has had an impact on non-food and overall inflation.
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How exchange rate changes impact Indian manufacturing firms
Anubha Dhasmana
Posted on: 02/04/2014 00:00:00

After falling to its lifetime low of 68.85 against the dollar in August last year, the Rupee has now appreciated to breach the 60-per-dollar mark. This column explores the impact of currency movements on the performance of Indian manufacturing firms. It finds that in the short run, real exchange rate movements have a significant impact on firm performance through changes in import costs, rather than changes in export competitiveness.
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Why taxing property is essential for local government accountability
Devesh Kapur , Arvind Subramanian
Posted on: 03/03/2014 00:00:00

With rapid decentralisation and urbanisation, wealth is increasingly vested and locked up in land and property in India. In their previous article, Kapur and Subramanian emphasised the importance of direct taxes in ensuring citizen participation in holding the government accountable. In this part, they recommend that the 14th Finance Commission should promote tax decentralisation by incentivising state and local government to increase the property tax net.
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Taxation´s fatal neglect?
Devesh Kapur , Arvind Subramanian
Posted on: 14/02/2014 00:00:00

Today, the public discourse on government finances in India is largely focused on spending. This article emphasises the importance of taxes, particularly income tax, in ensuring citizen participation in holding the government accountable. It shows that while economic growth in the past decade was faster than in preceding years, expansion of the direct tax net slowed down.
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Inflation targeting in India: Right and wrong
Gurbachan Singh
Posted on: 31/01/2014 00:00:00

An RBI-appointed Expert Committee has recommended targeting a 4% inflation rate, but allowing it to vary between 2% and 6%. This column takes a different position on the target and leeway. It argues that achieving truly low and stable inflation alongside macroeconomic stability is not as difficult as is usually made out to be, if the right policies are in place.
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Changing dynamics of the Indian gold market
Misha Sharma
Posted on: 13/01/2014 00:00:00

The demand for gold and its import have been on the rise in India, despite rising gold prices. The RBI has responded by introducing various measures to curb the demand for gold and gold loans. This column discusses the implications of these measures, and suggests complementing such curbs with innovative financial products that can act as substitutes for gold loans.
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India's unique crisis – a short term fix
Devesh Kapur , Arvind Subramanian
Posted on: 20/12/2013 00:00:00

While the current turbulence in the Indian economy bears a resemblance to the situation of other emerging economies, it is unique when compared with historical experiences of economic crises. In their previous article, Kapur and Subramanian discussed the misdiagnosis of India’s crisis, and consequent errors in policy remedies. In this part, they outline short-term actions for reversing the growth slowdown, reducing current account deficit and preventing inflation.
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India's unique crisis
Devesh Kapur , Arvind Subramanian
Posted on: 16/12/2013 00:00:00

While the current turbulence in the Indian economy bears a resemblance to the situation of other emerging economies, it is unique when compared with historical experiences of economic crises. In the first of a two-part article, Kapur and Subramanian discuss the misdiagnoses of India’s crisis, and the consequent errors in policy remedies. In the next part, the authors provide a short-term solution for India’s unique crisis.
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The Reserve Bank´s mission impossible?
Arvind Subramanian
Posted on: 29/11/2013 00:00:00

India’s current inflation is unprecedentedly high – not in absolute terms but relative to the rest of the world. This article discusses the role of inflation in the recent currency crisis, and argues that taming inflation may prove difficult because the social consensus in favour of moderate inflation appears to have eroded.
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What is mitigating a financial crisis in India?
Gurbachan Singh
Posted on: 08/11/2013 00:00:00

The recent turmoil in the currency market and the general slowdown in growth in India are disturbing. However, India has by and large performed better in terms of macro-financial stability as compared to many parts of the world. This column discusses the problems confronting policymakers, and current policy responses and associated costs, and suggests alternative policies.
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What saved the rupee?
Arvind Subramanian
Posted on: 06/11/2013 00:00:00

This article analyses the dramatic fall of the rupee between May and August this year, and its recovery thereafter. It asserts that it was primarily external factors and an unconventional intervention by the Reserve Bank of India that influenced the evolution of the rupee during the period.
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Exchange rate movements and Indian firms’ exports
Yin-Wong Cheung , Rajeswari Sengupta
Posted on: 01/11/2013 00:00:00

Understanding the effects of exchange-rate changes on a country’s trade balance calls for an analysis of how exchange-rate fluctuations affect the decisions of individual firms. This column explores the effects of changes in the exchange rate on the share of exports of Indian non-financial sector firms.
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Monkeying with the rupee
Debraj Ray
Posted on: 04/09/2013 00:00:00

In this article, Debraj Ray discusses the sharp depreciation of the rupee and the ongoing outflow of foreign capital from India. Further, he refutes claims that the costs associated with the Food Security Bill are having a negative impact on the Indian currency.
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Foreign investors under stress: Evidence from India
Ila Patnaik , Ajay Shah , Nirvikar Singh
Posted on: 19/07/2013 00:00:00

Emerging market policymakers are concerned about the effects of foreign portfolio flows on financial stability. This column focuses on the behaviour of investors in extreme events, allowing for the possibility that what happens under stressed market conditions may differ from day-to-day outcomes. The findings for India suggest that while on good days, foreign investors exacerbate the boom by bringing in additional capital, no significant effects are found on very bad days in the local economy.
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A right time for inflation-indexed bonds?
Viral Acharya , Gangadhar Darbha
Posted on: 07/06/2013 00:00:00

While the introduction of inflation-indexed bonds in India has been hailed by many as a step in the right direction, this column argues that their success will depend on how serious the government is about taming inflation. These bonds will help the government reduce its debt only if they are accompanied by anti-inflationary monetary and fiscal policies.
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The market for inflation-indexed bonds
Gurbachan Singh
Posted on: 31/05/2013 00:00:00

On 15 May 2013, the Reserve Bank of India announced that it would begin monthly issues of inflation-indexed bonds starting June 2013. These bonds, wherein in the principal amount adjusts according to changes in the price level, are already in use in the developed world and their introduction in India is a welcome development. However, they are likely to have different implications for India given the presence of the Statutory Liquidity Ratio regulation in the country.
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The challenges of opening up India’s capital account
Abhijit Sen Gupta , Rajeswari Sengupta
Posted on: 15/05/2013 00:00:00

A key objective for any open economy is to avoid a financial or balance of payments crisis – a goal that often calls for trade-offs between liberalisation and maintaining control of the economy. This column explores the trade offs India has made.
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Long term recovery of the Indian economy depends on reforms
Sarah Chan
Posted on: 24/04/2013 00:00:00

The Indian economy has been facing challenges in the form of sluggish growth, high inflation, and rising fiscal and current account deficits. This column highlights trends in the economic conditions, and outlines policy actions and reforms needed to put the economy back on track.
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Why India should not further delay a credit line from the IMF
Gurbachan Singh
Posted on: 03/04/2013 00:00:00

India is expected to run a current account deficit of more than 4% of its GDP this year. At the moment this can be paid for with money coming in from abroad – but what if the flow of money were to suddenly stop? This column argues that India should not further delay a credit line from the IMF.
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Capital controls in India: Did they work?
Ila Patnaik , Ajay Shah
Posted on: 21/01/2013 00:00:00

Are capital controls the right way to manage an economy? This column looks at what we can learn from India’s experience, where capital controls have never been fully dismantled.
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Understanding India’s monetary policy
Rajeswari Sengupta , Nirvikar Singh
Posted on: 21/12/2012 00:00:00

From the outside looking in, it may seem that India’s central bank is making up its own rules, making it difficult to predict the next movements in the interest rate. This column argues that the central bank is in fact following a rule, you just have to look hard enough.
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Monetary policy in India and other developing countries
Prachi Mishra , Peter Montiel
Posted on: 03/09/2012 00:00:00

Setting interest rates and controlling inflation is an altogether different challenge in countries like India. This column argues that in many developing countries, the financial system is still too underdeveloped for monetary policy to have a reliable effect on the economy, raising doubts over several of today’s policies.
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Measuring India’s Capital Control Regime
Nirvikar Singh
Posted on: 23/08/2012 00:00:00

India’s policies on international capital flows are extremely complex, in part due to the absence of a consensus on the value of capital account controls. This column argues that the tools for measuring the implementation of the policy need to be revisited, and presents new evidence to suggest that India’s capital account has been liberalised – without leading to economic disaster.
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Searching for the soul of monetary policy in India
Amartya Lahiri
Posted on: 09/08/2012 00:00:00

What is the thinking behind the current policy of the Reserve Bank of India? This column argues that its rules for deciding on India’s interest rates are based on assumptions that hold in developed economies – but not necessarily in India. Indeed, in many cases this leads to precisely the wrong policy decisions.
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