India’s Experience with Fiscal Rules: An Evaluation and The Way Forward
IMF Working Papers, August 1, 2009
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- India’s Experience with Fiscal Rules: An Evaluation and The Way Forward
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Bibliographic details
- Authors: Alejandro Simone, Petia Topalova
- Published: August 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451873221.001
Summary
- 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.
Major findings and analysis
- Emphasis on debt sustainability as the central objective of medium-term fiscal policy.
- Proposal to combine:
- a medium term debt target, and
- annual nominal expenditure growth rules.
- The proposed framework is intended to:
- tackle the deficit bias,
- enable countercyclical fiscal policy through automatic stabilizers,
- require numerical targets to be supported by structural reform measures for revenues and expenditures,
- expand the coverage of the fiscal rules.
Policy recommendations
- Adopt a medium-term debt target as the anchor of fiscal policy.
- Implement annual nominal expenditure growth rules to control fiscal expansion.
- Support numerical fiscal targets with structural reforms on both revenue and expenditure fronts.
- Expand the coverage of fiscal rules to reduce scope for off-budget or circumventing measures.
- Preserve scope for countercyclical policy via automatic stabilizers within the rules-based framework.
Publication and metadata
- Authors: Alejandro Simone, Petia Topalova
- Date: August 1, 2009
- Series: Working Paper No. 2009/175
- Issue: 175
- Volume: 2009
- Pages: 40
- DOI: https://doi.org/10.5089/9781451873221.001
- Stock No: WPIEA2009175
- ISBN: 9781451873221
- ISSN: 1018-5941
- Subject: Expenditure, Fiscal consolidation, Fiscal policy, Fiscal rules, Public debt
- Keywords: borrowing regime, country, deficit, government, government finances, Includes, state government, WP
IMF Working Paper — Alejandro Simone and Petia Topalova, "India’s Experience with Fiscal Rules: An Evaluation and The Way Forward", August 1, 2009.