India’s Experience with Fiscal Rules: An Evaluation and The Way Forward

Alejandro Simone and Petia Topalova

No 2009/175, IMF Working Papers from International Monetary Fund

Abstract: This paper examines India's experience with fiscal rules with a view to inform the design of a possible successor fiscal framework to the FRBMA. Among several proposals to strengthen the FRBMA, a framework that focuses medium-term fiscal policy on debt sustainability by the use of a medium term debt target, and annual nominal expenditure growth rules is proposed. This approach tackles the deficit bias at its core and enables countercyclical fiscal policy through automatic stabilizers. Numerical targets should be supported by structural reform measures for both revenues and expenditures, while the coverage of the fiscal rules should be expanded.

Keywords: WP; government; country; Includes; deficit; borrowing regime; government finances; state government (search for similar items in EconPapers)
Pages: 40
Date: 2009-08-01
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