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

September 1, 2004

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Ricardo Hausmann, and Catriona Purfield. The Challenge of Fiscal Adjustment in a Democracy: The Case of India, (USA: International Monetary Fund, 2004) accessed September 19, 2024

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.

Subject: Budget planning and preparation, Expenditure, Fiscal policy, Government debt management, Public debt, Public financial management (PFM)

Keywords: Africa, Budget planning and preparation, Central government, Channels half, Debt, Debt relief, Debt rise, Eastern Europe, Electoral system, Federal relations, Fiscal deficits, Fiscal responsibility legislation, Government approval, Government channels half, Government debt, Government debt management, Government experience, Government fund, Interest rate, Levels of government, Monitoring government fund, Political system, State election, Sub-Saharan Africa, Western Europe, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/168
Stock No:

WPIEA1682004
ISBN:

9781451858297
ISSN:

1018-5941

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