The Challenge of Fiscal Adjustment in a Democracy : The Case of India

Author/Editor:

Ricardo Hausmann ; Catriona Purfield

Publication Date:

September 1, 2004

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

India's fiscal problem has deep roots in its federal fiscal system, where multiple players find it difficult to coordinate adjustment. The size and closed nature of the Indian economy, aided by its deep domestic capital market and large captive pool of domestic savings, has disguised the cost of fiscal laxity and complicated the building of a consensus on reform. The new fiscal responsibility act establishes a new rules-based system to overcome this coordination failure. To strengthen the framework, we recommend an autonomous scorekeeper and the extension of similar rules to the state governments as part of a comprehensive reform of the federal system.

Series:

Working Paper No. 04/168

Subject:

Debt Fiscal deficits Fiscal policy India

English

Publication Date:

September 1, 2004

ISBN/ISSN:

9781451858297/1018-5941

Stock No:

WPIEA1682004

Format:

Paper

Pages:

30

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