Fiscal multipliers in India: A macro-model linking human development, growth and distribution

Sukanya Bose () and Saikat Banerjee ()
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Sukanya Bose: National Institute of Public Finance and Policy
Saikat Banerjee: National Institute of Public Finance and Policy

Working Papers from National Institute of Public Finance and Policy

Abstract: A macroeconomic framework integrating growth, distribution and human development with social spending as a crucial link provides an alternative view for conceptualizing fiscal policy for India. In policy formulation, the growth potential of social spending is ignored while concerns about fiscal implications of social spending are overstated. Using a demand-side macro model incorporating necessary supply side features for the Indian economy, the growth implications of social spending is demonstrated. The social spending multiplier in India, estimated over 1990 to 2022 stands at 1.67, with implications for growth and human development following across several years. The results indicate that a combination of policies on social sector expenditure, along with policies on income redistribution are both growth-promoting and self-financing in nature.

Keywords: Human Development; Growth; Aggregate Demand; Social spending; Fiscal multiplier; Debt Sustainability; structural; policy simulation; distribution (search for similar items in EconPapers)
Pages: 46
Date: 2025-09
New Economics Papers: this item is included in nep-pke and nep-sea
Note: Working Paper 436, 2025
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