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New issues in Indian macro policy

Ajay Shah ()

Working Papers from eSocialSciences

Abstract: For many decades, macro-policy in India was conducted in an environment with five key elements: Agricultural shocks rather than a conventional business cycle; A closed economy; deeply distortionary tax policy coupled with a fiscal crisis; financial markets that lacked speculative price discovery, and a monetary policy which was shaped by deficit financing. The paper argues that India has changed beyond recognition on all these five elements and that these changes have far-reaching consequences for the conduct of macroeconomic policy. India is now a more conventional market economy, and there is a much bigger role for the great themes of macroeconomics - as it is practised elsewhere in the world - in shaping Indian macro policy. [NIPFP-WP]

Keywords: macroeconomics; business cycle; agricultural shocks; tax policy; macroeconomics; public finance; Indian Economy (search for similar items in EconPapers)
Date: 2008-05
Note: Institutional Papers
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