An autonomous research institute under the Ministry of Finance

 

Working papers

A nowcast of 2021-22 GDP growth and forecast for 2022-23 based on a Factor Augmented Time Varying Coefficients Regression Model

  • Dec, 2021
  • Authors Rudrani Bhattacharya and Sudipto Mundle
  • Details NIPFP Working Paper No. 361
  • Abstract

    In this paper we have used our recently updated Factor Augmented Time Varying Coefficients Regression (FA-TVCR) model (Bhattacharya, Chakravartti and Mundle, 2019; Bhattacharya, Bhandari and Mundle 2021) to nowcast GDP growth for 2021–22 and forecast it for the year 2022-23. Our GDP growth nowcast for 2021-22 is 9.9 per cent, somewhat higher than the RBI projection of 9.5 per cent. The forecast for 2022-23 is 5.2 per cent. Factoring in an inflation rate of 5 per cent, this would translate to a nominal GDP growth rate of 10.2 per cent which is lower than the RBI projection of 12.3-13 percent but slightly higher than the 15th Finance Commission projection of 9.5 percent.

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Economic Theory Versus Economic Reality: Dealing with Pandemics and Other Global Public Goods and Bads

  • Nov, 2021
  • Authors Vito Tanzi
  • Details NIPFP Working Paper No. 360
  • Abstract
    In democratic countries with market economies, there is the presumption that elections determine policies, including tax policies, to deal with expected, collective needs and with national public goods. However, the importance of global public goods and of global public "bads" has increased in a globalized world. Policies have continued to be made by national governments. This creates problems in dealing with pandemics, global warming and other global problems, that may come at times unexpectedly. This new reality has not led to changes in either the institutional setting of policies or the preparation for "uncertain events". National policies continue to be focused on normal developments. They tend to ignore the possible coming of” uncertain events", events the probability of which cannot be estimated statistically. Dealing with uncertain, unpredictable events is of course difficult. However, these events do occasionally materialize as history shows. This points to the need to reorient both economic theory and economic institutions more towards these uncertain, and often global, events. There is a need for developing a federalism literature at the global level.
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Fiscal dominance in India: An empirical estimation

  • Nov, 2021
  • Authors Anshuman Kamila
  • Details NIPFP Working Paper No. 359
  • Abstract
    This paper examined fiscal dominance in the Indian context by measuring the impact of Centre’s primary fiscal balance on real interest rates and real GDP growth rate in the VECM framework. It was observed that an improvement in fiscal balance had a positive impact on real interest rate prior to 2003, and in the subsequent periods it turned negative. With regard to the impact of primary fiscal balance on real growth rate, it was observed that the period of 1978-2003 remained a period of dominant fiscal presence and an improvement in fiscal balance i.e. a reduction in fiscal deficit had a positive growth effect. The period following 2003, there was no evidence of fiscal dominance in the Indian economy.
     
    Keywords: VECM, Cholesky impulse response, fiscal dominance, FRBM
    JEL classification: E52, E62, H62
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Revenue Implications of GST Rates Restructuring in India: An Analysis

  • Nov, 2021
  • Authors Sacchidananda Mukherjee
  • Details NIPFP Working Paper No. 358
  • Abstract
    Keeping in mind the revenue needs of the governments, we assess the revenue implications of restructuring GST rates. The study builds six alternative scenarios based on various assumptions about the tax rate-wise distribution of taxable value and tax liabilities. Unlike previous studies on RNRs, the present study relies on aggregate tax information as captured through GSTR-1. In line with data available from the GSTN database, the study considers only domestic component of GST collection (i.e., CGST, SGST and IGST- domestic component). 
     
    Our study estimates merger of 12 and 18 per cent tax slabs into 15 per cent and estimates tax rates required to achieve revenue neutrality. The results show that merging 12 per cent and 18 per cent tax rates into any tax rate lower than 18 per cent may result in revenue loss. Based on various estimates, the study proposes that to compensate the revenue loss, the GST council may consider three rate structure of GST by adopting 8 per cent, 15 per cent and 30 per cent and it may help achieve revenue neutrality. In all scenarios, we assume that status quo in special rates will be maintained.
     
    Keywords: Goods and Services Tax, Tax Base, Revenue Neutral Rates (RNRs), GST Rate Structure, Tax Buoyancy.
    JEL Codes: H20, E62, H26
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Nowcasting India’s Quarterly GDP Growth: A Factor Augmented Time-Varying Coefficient Regression Model (FA-TVCRM)

  • Oct, 2021
  • Authors Rudrani Bhattacharya, Bornali Bhandari and Sudipto Mundle
  • Details NIPFP Working Paper No. 357
  • Abstract
    Governments, central banks, private firms and others need high frequency information on the state of the economy for their decision making. However, a key indicator like GDP is only available quarterly and that too with a lag. Hence decision makers use high frequency daily, weekly or monthly information to project GDP growth in a given quarter. This method, known as nowcasting, which started out in advanced country central banks using bridge models. Nowcasting is now based on more advanced techniques, mostly dynamic factor models. In this paper we use a novel approach, a Factor Augmented Time Varying Coefficient Regression (FA-TVCR) model, which allows us to extract information from a large number of high frequency indicators and at the same time inherently addresses the issue of frequent structural breaks encountered in Indian GDP growth.  One specification of the FA-TVCR model is estimated using 19 variables available for a long period starting in 2007-08:Q1.  Another specification estimates the model using a larger set of 28 indicators available for a shorter period starting in 2015-16:Q1. Comparing our model with two alternative models, we find that the FA-TVCR model outperforms a DFM model in terms of both in-sample and out-of-sample RMSE. The RMSE of the ARIMA model is somewhat lower than the FA-TVCR model within the sample period but is higher than the out-of-sample of the FA-TVCR model. Further, comparing the predictive power of the three models using the Diebold-Mariano test, we find that FA-TVCR model out-performs DFM consistently. In terms of out-of-sample forecast accuracy both the FA-TVC model and the ARIMA model have the same predictive accuracy under normal conditions. However, the FA-TVCR model outperforms the ARIMA model when applied for nowcasting in periods of major shocks like the Covid-19 shock of 2020-21.
     
    Keywords: Nowcasting, Quarterly Year-on-Year GDP growth, State-Space Model, India.
    JEL Classification: C52, C53 and O40
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Revenue Shortfall and GST Compensation: An Assessment

  • Oct, 2021
  • Authors Sacchidananda Mukherjee
  • Details NIPFP Working Paper No. 356
  • Abstract
    Shortfalls in GST compensation cess collection vis-à-vis GST compensation requirements of states for the Fiscal Years 2020-21 and 2021-22 are concerns for the Union as well as State governments. During 2020-21, the Union government borrowed Rs. 1.10 lakh crore against Government of India securities to provide compensation to the States. The Union government has also committed to borrowing 1.59 lakh crore during 2021-22 from the market (as back-to-back loans) to provide compensation to the States. As the GST compensation cess will be extended to pay interest and principal payment liabilities of the debt incurred by the Government of India, in this paper, we estimate whether GST compensation cess collections at the current rate will be sufficient to service the debt cost. We also rank States and their relative dependence on GST compensation for 2018-19 and 2019-20. We find that the economic structure (origin versus consuming state) of a state is an important factor affecting revenues and thereby the level of compensation requirement. 
        
    Key Words: Goods and Services Tax (GST), GST Compensation, GST Transition Period, Revenue Protection, India.   
    JEL Codes: H20, E62, H26
     
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COVID-19 and Public Investment for Children: The case of Indian State of Karnataka

  • Oct, 2021
  • Authors Jannet Farida Jacob and Lekha Chakraborty
  • Details NIPFP Working Paper No. 355
  • Abstract
    The ex-post analysis of public finance for children (PF4C) for the year 2020-21 for the State of Karnataka reveals that it constitutes 15 per cent of the total public expenditure and 1.68 per cent of GSDP. Of this, 80 per cent is spent on education. The fiscal marksmanship ratio and the PEFA score for PF4C indicate that there are significant deviations between budget allocation and actual spending. Karnataka though is a fiscally prudent State, with all its fiscal parameters well within the stipulated limits of “fiscal rules”, resorted to episodic expenditure compression in social sector which in turn impacted PF4C. Given the impact of the COVID-19 pandemic on education, health and income, it is imperative for the State to look beyond the transitory fiscal stimulus packages and strengthen the long-term PFM tool like child budgeting.
     
    JEL Codes: H30, H750, E62
    Keywords: Public Financial Management, Child Budgeting, State Expenditure, Karnataka
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In search of a solution to tax digital economy

  • Oct, 2021
  • Authors Suranjali Tandon
  • Details NIPFP Working Paper No. 354
  • Abstract
    At present the international tax system is in need of reform so as to ensure that digital corporation pay taxes in countries where they operate. The search for a global solution has resulted in divergence in approaches adopted by countries. This paper delineates the fundamental economic challenges that the tax reform seeks to address, the historical evolution of tax laws and the best possible solutions given the discord between source and residence countries. The paper finds that digital services tax, with foreign credits, can offer a final global solution amenable to developing countries.
     
    Key words: permanent establishment, digital tax, user participation, treaties, developing countries
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Analysing India’s Exchange Rate Regime

  • Sep, 2021
  • Authors Ila Patnaik and Rajeswari Sengupta
  • Details NIPFP Working Paper No. 353
  • Abstract
    We analyse India's exchange rate regime through the prism of exchange market pressure. We estimate the various regimes that India’s de-facto exchange rate has been through during the period from 2000 to 2020. We find four specific regimes of the Indian rupee differentiated by the degree of flexibility of the exchange rate. We document the manner in which EMP in India has either been resisted through foreign exchange market intervention, or relieved through exchange rate change, across these four defacto exchange rate regimes. In particular, we find that after the 2008 global financial crisis the rupee-dollar exchange rate was relatively more flexible and the share of exchange rate in EMP absorption was the highest. After 2013 there was a change in the way the EMP was absorbed. The exchange rate was actively managed using spot as well as forward market intervention. We also find that the response of the RBI to EMP has been asymmetric. When there is pressure to appreciate, the RBI has typically responded by purchasing reserves. On the other hand, in the periods in which there has been pressure to depreciate, only a tiny fraction of reserves are used for resisting the pressure. Such pressure is absorbed by rupee depreciation.
     
    Keywords: Exchange rate regime, Forex intervention, Reserves, Exchangen market pressure, Structural change
     
    JEL codes: E58, F31, F41
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On the Macrodynamics of COVID-19 Vaccination

  • Aug, 2021
  • Authors Soumya Datta and C. Saratchand
  • Details NIPFP Working Paper No. 352
  • Abstract
    We set up a macroeconomic epidemiological (SIR) model to evaluate the role of vaccination in the interactive dynamics of COVID-19 and the economy. We analytically examine the existence and local stability properties of the four steady states and find strong support for a locally stable interior equilibrium where the economy grows in the continued presence of the pandemic. We also find that it might be possible to attain a pandemic-free economic revival only if the rate of recovery from infection is faster than a threshold level. We examine, both analytically and numerically, the impact of various types of  policy interventions, including non-pharmaceutical interventions involving restrictions on economic activities (like lockdowns and travel restrictions) as well as speeding up the rate of vaccination. We find that under reasonable parameter configurations, a combination of large-scale vaccination as well as non-pharmaceutical interventions are required to meet the twin objectives of controlling the pandemic and reviving the economy.
     
    Keywords: COVID-19, health, stability, vaccination, non pharmaceutical intervention .
     
    JEL classification: E10, E61, I10, I18.
     
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Characterising land and property related litigation at the Delhi High Court

  • Aug, 2021
  • Authors Devendra Damle and Karan Gulati
  • Details NIPFP Working Paper No. 349
  • Abstract
    There are three common conjectures regarding land and property related litigation in India. First, it forms a large proportion of the caseload of Indian courts. Second, the quality of property records is to blame for the large volume and length of the litigation. Third, the caseload is compounded due to the complexity created by the multitude of laws that govern land and property. Additionally, the government is thought to be the largest litigant. This paper presents a novel data-set of case-level data from the Delhi High Court to test these conjectures. It answers important questions regarding the volume and typologies of such disputes, and the typologies of litigants. At the Delhi High Court, land and property disputes constitute 17% of the litigation. In these cases, the largest proportion of litigation is between private parties. The Union government is the petitioner (or appellant) in 2% of such litigation but is the respondent in more than 18% of cases. Tenancy and land acquisition matters are the most common types of litigation. Lastly, approximately 14% of property litigation originates from and is related to property records.
     
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Intra-Industry Trade in Manufactured Goods: A Case of India

  • Aug, 2021
  • Authors Manmohan Agarwal & Neha Betai
  • Details NIPFP Working Paper No. 348
  • Abstract
    Since the second world war, it was observed that trade between two countries could not be explained entirely by the classical and neoclassical models of trade that emphasised inter-industry trade. It was found that trade between countries was increasingly dominated by intra-industry trade (IIT), where countries exchanged products that fell in the same category. In this paper, we try to determine the extent of IIT between India and its top fifteen trading patterns. Unlike other papers, we do not simply calculate aggregate IIT for all merchandise trade. Instead, we focus on manufactured products and divide them into ten categories based on their technological content. Our analysis reveals that while India's IIT has increased in recent years, it is not the dominant form of trade between India and its most important partners. When we look at the factors that determine IIT, we find that India's comparative advantage and trade agreements play a positive and significant role in increasing IIT. Lastly, an analysis of the category Medium Technology Manufactures - Process reveals that this sector has potential for higher IIT and gains from it if India can enhance its efficiency and increase its size.
     
    Keywords: Intra-industry trade, Technological content, Trade Partners
     
    JEL Codes: F12, F14, F15
     
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COVID-19 Context and the Fifteenth Finance Commission: Balancing Fiscal Need and Macroeconomic Stability

  • Aug, 2021
  • Authors Pinaki Chakraborty
  • Details NIPFP Working Paper No. 351
  • Abstract
    The objective of this paper is to understand the core recommendations of the Fifteenth Finance Commission in the context of COVID-19 pandemic. Given the macroeconomic uncertainties and rising fiscal needs, the commission focused on fiscal stability, equity and enhancement of fiscal space through higher borrowing with a fiscal exit plan for both Union and States.
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Inheritance rights of transgender persons in India

  • Aug, 2021
  • Authors Karan Gulati and Tushar Anand
  • Details NIPFP Working Paper No. 350
  • Abstract
    This paper studies the inheritance rights of transgender persons in India. Using commercial databases (e.g., SCC and Manupatra), it examines the legal framework for inheritance and looks at all court decisions since 1950 that mention the term transgender. Inheritance laws are based on a binary notion of gender. They do not envisage transgender persons or a change in gender identity. This means that individuals must choose between conforming to their assigned gender or not availing their rights. Moreover, successors are often difficult to identify as individuals may lack documentation, could not marry, or cannot prove adoption. The Indian Constitution bars any discrimination based on sex and gender. Laws should not discriminate against transgender persons only because of their identities. Though courts attempt to address these challenges, they leave it to their subjective satisfaction on when to secure the rights of transgender persons. These are important issues that must be addressed through changes in the law.
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Emerging Issues in GST Law and Procedures: An Assessment

  • Aug, 2021
  • Authors Diva Mehta and Sacchidananda Mukherjee
  • Details NIPFP Working Paper No. 347
  • Abstract
    Adopted in 2017, the Goods and Service Tax (GST) marked the beginning of a new era in the history of indirect taxation of India – an era aspiring to realize the dream of ‘One Nation, One Tax’ for one of the biggest federal democracies in the world. In line with the fiscal federalism prevalent in India, GST has not only branched into IGST, CGST and SGST with different tax rates, but also has a provision for Centre-to-State compensations to make up for the losses incurred by the States during the transition phase of GST. 
     
    For such an elaborate taxation arrangement to face bottlenecks, both at the time of roll-out and its subsequent expansion, is not unusual. A range of tailbacks are observed, ranging from the difficulties of transitioning from the earlier regimes, difficulties in the understanding the GST law(s), various technical, procedural and administrative glitches, and above all the complexity of Centre-State relationships.
     
    On the fourth year of the adoption of GST in India, we revisit the big Indian dream of national integration via a single-spine tax system. We explore the issues in the existing GST systems to suggest probable solutions that can smoothen the way forward.
     
    Key Words: Goods and Services Tax (GST), Value Added Tax (VAT), Input Tax Credit (ITC), Reverse Charge Mechanism (RCM), Input Service Distributor (ISD)
     
    JEL Classification Codes: H20, H71, H73, H77
     
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Evolution of cooperative networks

  • Aug, 2021
  • Authors Siddhi Gyan Pandey
  • Details NIPFP Working Paper No. 346
  • Abstract
    Situations that require individuals to mutually cooperate are often analysed as coordination games. This paper proposes a model of cooperative network formation where the network is formed through the process of the coordination game being played between multiple agents. Additionally, network effects are modelled in by the fact that the benefit to any agent from a mutually cooperative link is enhanced, over a base value, by a factor of her trustworthiness or reputation as observed by her partner in that link. Within this framework, evolution of cooperative networks is analysed in the presence of altruistic agents, through repeated interaction between myopically best responding agents in a finite population. Properties of networks that sustain as Nash equilibrium are also analysed.
     
    Keywords: coordination game, network formation, game theory, social networks
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MULTIPLE PUBLIC GOODS IN NETWORKS

  • Aug, 2021
  • Authors Rajendra P. Kundu and Siddhigyan Pandey
  • Details NIPFP Working Paper No. 345
  • Abstract

    In this paper we consider an n-player simultaneous move game on a fixed network, in which each player chooses her investment level in each of m goods that are non-rivalrous and non-excludable across links in the network. We analyze the existence, stability and welfare properties of PSNEs of the game. Our results demonstrate that while every game necessarily has a specialized equilibrium, the stability of equilibrium profiles and the existence of specialized equilibria in which specialization is dispersed depend crucially on the network structure. We also provide some interesting welfare implications relating to concentration of specialization.

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Unshrouding product-specific attributes through financial education

  • Aug, 2021
  • Authors Olga Balakina, Vimal Balasubramaniam, Aditi Dimri, and Renuka Sane
  • Details NIPFP Working Paper No. 344
  • Abstract

    We present a welfare framework to evaluate the market effects of financial education interventions. Using this framework, we assess a new product-specific rules of thumb-driven consumer financial education program provided just before purchase decisions. While our intervention improves knowledge and outcomes for newly-educated consumers, it is a Pareto-improvement only under a narrow set of conditions, as are other interventions in the literature. Our findings suggest that positive treatment effects for a small fraction of consumers may come at the cost of other uninformed consumers in retail financial markets, making positive effects necessary but not sufficient to adopt financial education policies.

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Continuity with Change: Approach of the Fifteenth Finance Commission

  • Aug, 2021
  • Authors Ajay Narayan Jha
  • Details NIPFP Working Paper No. 342
  • Abstract
    The two latest Finance Commissions – the Fourteenth Finance Commission (FC-XIV) and the Fifteenth Finance Commission (FC-XV)– mark a break from the past. The paper explores the structural shift in federal finances with the abolition of the Planning Commission and contemporaneous circumstances that shaped the approach of the FC-XV and examines the intersections and divergence, continuity and change, with FC-XIV in terms of its treatment of and approach to the three core issues of vertical and horizontal devolution, grants-in-aid to the States and transfers to local governments. It argues that the pervasive impact of the pandemic has shaped the recommendations of FC-XV in several ways without compromising on the Constitutional principles and retaining the balance in federal transfers between the Union and the States and amongst the States. At a time when the growth prospects of the economy are uncertain, innovative use of targeted grants linked to performance-based criteria for specified sectors through the States and local governments address glaring gaps in public services and potentially trigger reform in critical sectors.
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Consumption baskets of Indian households: Comparing estimates from the CPI, CES and CPHS

  • Aug, 2021
  • Authors Ananya Goyal, Radhika Pandey and Renuka Sane
  • Details NIPFP Working Paper No. 343
  • Abstract
    A study of inflation requires a fixed consumption basket. The last publicly available data on household consumption baskets is from Consumer Expenditure Survey (CES) 2011-12. A more recent source of data has been the CMIE Consumer Pyramid Household Survey (CPHS). In this paper we compare the weights of various commodities in the Consumer Price Index (CPI) series with the CES 2011-12 and the CPHS 2019. We first document the methodology of construction of the Consumer Price Index (CPI) including details on commodity classification, reference and recall periods. We find that while CPI is based on CES 2011-12, CPI weights closely match those of CES 2011-12 only once the sub-group ‘Housing’ is excluded from the total consumption expenses. For comparison with CPHS, we first map the CPHS commodities to CPI to make them comparable. We find the differences in some categories such as food, household goods and servicesare less than 2 percentage points. Differences in the shares of commodities such as transport and communication, health, education and intoxicants are larger.
     
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Mainstreaming Climate Change Commitments through Finance Commission’s Recommendations

  • Aug, 2021
  • Authors Lekha Chakraborty
  • Details NIPFP Working Paper No. 341
  • Abstract

    India was the first to integrate climate change criterion in the inter-governmental fiscal transfers. This analysis suggests that climate change criterion in the intergovernmental fiscal transfer mechanism in India is a significant step to incentivise the conservation of forests. However, the macropolicy channel of this link is through the public expenditure priorities related to climate change commitments by the state governments, to make a “just transition” towards a sustainable climate-resilent economy.

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Regulation and Informal Market for Schools in Delhi

  • Aug, 2021
  • Authors Sukanya Bose, Priyanta Ghosh, Arvind Sardana and Manohar Boda
  • Details NIPFP Working Paper No. 340
  • Abstract
    The unrecognised school sector in Delhi has grown significantly over the years, and since long ceased to be marginal. The aim of the study is to understand the regulatory practice on the ground in this sector. According to the law, private schools must seek recognition from the appropriate authorities such that their functioning is aligned to public interest. Reading of the laws and an important Court case provides the background to the primary fieldwork on which the analysis is based. The results of the field survey indicate that unrecognised schools are growing unfettered. There is incentive for informality, regulation is totally absent and vested interests attempt to perpetuate the practice. The continuation of hands-off policy of the government vis-à-vis the sector despite the clear pronouncements in the Right to Education Act is explored from a variety of perspectives. Some suggestions towards formalisation are presented.
     
    Keywords: Low fee private schools, unrecognised schools, regulation, informality in schooling, educational policy, educational law, RTE.
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The Indian manufacturing sector: finance, investment and performance of firms

  • Aug, 2021
  • Authors Manmohan Agarwal and Rumi Azim
  • Details NIPFP Working Paper No. 339
  • Abstract
    The paper tests the hypothesis that financial stress caused the stagnation in the manufacturing sector, using firm level data on a sample of 804 large, mid, and small cap manufacturing firms for 15 years from 2005 to 2019. We analyse the trend in the financial indicators and estimate dynamic panel data regression using a two-step GMM method. We do not find substantial for financial stress to be a major determinant of the investment slowdown in these firms. Our results support the Pecking order theory, particularly for larger firms. In addition, we find that the declining growth in sales is a major determinant in explaining the slowdown in fixed investments and profits. For small cap firms, the size of the firms also matters. We therefore suggest that measures to increase demand can help in reviving the sales growth of firms and thereby private investments and profits.
     
     
    Keywords: Capital structure, Investment, Profitability, Manufacturing, India
     
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Sub-national Budget Credibility Institutional Perspective and Reform Agenda in India

  • Jul, 2021
  • Authors Pratap Ranjan Jena and Abhishek Singh
  • Details NIPFP Working Paper No. 338
  • Abstract
    The fiscal management principles enshrined in fiscal responsibility acts of states emphasize on formulating budget in a realistic manner with due regard to general economic outlook and realistic revenue prospects and minimizing deviations during a year. Failure to implement the budgets as planned may result in shifting spending priorities, exceeding deficit targets, and compromising on critical service delivery promises. This budgetary tenet assumes significance as the states have to respond to disruption in revenues, rising expenditure burdens and changes in priorities in the wake of Covid-19 pandemic and face challenges to restore fiscal consolidation process. The paper assesses the budget credibility of states in India to explain their ability to implement planned activities and respond to fiscal stress. It also focuses on strengthening institutional framework to utilize fiscal instruments optimally for better service delivery and development. 
     
    JEL Classification: H61, H68, E62
     
    Keywords: PEFA, Budgeting System, Multi-year Expenditure Framework, Fiscal Rules, Performance Budgeting
     
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Public Finance Management in India in the time of COVID-19 Pandemic

  • May, 2021
  • Authors Sacchidananda Mukherjee and Shivani Badola
  • Details NIPFP Working Paper No. 337
  • Abstract
    Due to the COVID-19 pandemic, public financial management in the FY 2020-21 and 2021-22 have become extremely challenging. The economic contraction has created pressures on PFM in India in terms of lower revenue mobilisation and higher expenditure needs. Both the Union and state governments are facing dual problem of arresting economic contraction and managing public finance with limited resources. The present paper analyses public finance management of the Union as well as 16 major Indian states during the time of COVID-19 pandemic. For comparison, we have also analysed pre-COVID public finance monthly data of state governments. The shock to PFM came from both the revenue as well as expenditure side. Apart from aggregate analysis of state finances of 16 major states, we present state-wise analysis to highlight measures adopted by states to deal with the unprecedented fiscal crisis.
     
     
    Key Words: COVID-19 pandemic, Indian Public Finance, Fiscal Managements, Revenue Mobilisation, Fiscal Deficit, Revenue Deficit.
     
    JEL Classification codes: H20, H61, H62, H63
     
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How effective is e-NAM in integrating food commodity prices in India? Evidence from Onion Market

  • Apr, 2021
  • Authors Rudrani Bhattacharya and Sabarni Chowdhury
  • Details NIPFP Working Paper No. 336
  • Abstract
    A series of market distortionary rules and regulations hinder development of an integrated agricultural market in India. In order to ensure greater transparency and uniformity of food commodity prices across states, various reform measures have to be undertaken to develop agriculture marketing. These measures concentrate on the numerous areas, specifically infrastructure development, information provision, improving the role of private sector and decreasing government sector intervention, training of farmers and traders in marketing and post-harvest issues, and most importantly creating a competitive national market for food commodities. The Indian government established e-NAM as a first step toward inducing competition in the agricultural market in 2016. The e-NAM or the National Agriculture Market, is a pan-India electronic trading portal which integrates the existing APMC mandis to create a unified national market for agricultural commodities. In this backdrop, this paper examines whether the introduction of e-NAM by the government has improved the spatial integration of onion markets in India. Using the maximum likelihood method of cointegration, it investigates onion market price integration of Maharashtra , Karnataka , Rajasthan , West-Bengal with the average wholesale onion price of India for the period 2010-2016 (before e-NAM ) and 2016-2019 ( after e-NAM ). It provides evidence in favour of market integration for the period 2016-2019, while multiple relations are found to govern onion prices across states during 2010-2016.  The evidence in effect suggests that introduction of e-NAM in 2016 has improved market integration for onion market prices in India. 
     
    Keywords: Unit root, Cointegration, Spatial Market Integration, Onion market, e-NAM, India
     
    JEL Classification: C22, C32, O53, Q11.
     
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Covid-19 Economic Stimulus and State-level Power Sector Performance: Analyzing the Efficiency Parameters

  • Mar, 2021
  • Authors Amandeep Kaur, Lekha Chakraborty, Divy Rangan
  • Details NIPFP Working Paper No. 333
  • Abstract
    Against the backdrop of the COVID-19 pandemic, the Government of India, as part of economic stimulus package, increased the borrowing limit of the States from 3 to 5 per cent of GSDP. The power sector reform at the State-level is one of the criteria to avail this extra-borrowing. We analyse the efficiency parameters of power sector and observe that there are statewise differentials in the financial and operational indicators of power sector. We notice that the average AT&C (Aggregate Technical and Commercial) losses that should have been 15% by 2018-19, presently, on average, stand at 26.15%. The ACS-ARR gap (the gap between Average Cost and Average Revenue) has also widened. The power tariff revisions have also not been implemented in the States, and the operational parameters in our analysis indicate widening inefficiencies across States in power infrastructure.
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Financing Biodiversity and Ecosystems Conservation in India: Implications for Efforts and Outcomes

  • Mar, 2021
  • Authors Rita Pandey, Manish Gupta, Paavani Sachdeva, Abhishek Singh and Sumit Aggarwal
  • Details NIPFP Working Paper No. 335
  • Abstract
    Biodiversity and Ecosystem (BE) conservation finance in India, is highly fragmented. Multiple institutions are involved in directing finance often with overlapping functions. This has adversely impacted BE conservation efforts and outcomes in India. While a couple of studies have attempted to map the flow of funds towards biodiversity and ecosystem (BE) conservation, there is no comprehensive estimate of total public funding, including budgetary flows, in India. The paper not only fills this gap by presenting a methodology for mapping and estimation of fund flows for BE expenditure through budgetary and other public sources but also estimates fund flows from externally aided projects and corporate sector. Using a modified Rio-marker methodology and budgetary data on actual expenditure it estimates expenditure on BE for a period of 7 years (2009-10 to 2015-16) thereby contributing to both theoretical and empirical literature on the subject. The study estimates that states in India, on an average spend between 1.93 and 3.19 percent of their total expenditure towards BE conservation. Paper finds that owing to the fact that BE conservation in India is driven by programs of multiple institutions rather than National Biodiversity Targets; there is no mechanism for measuring either conservation expenditures or outcomes. The paper makes suggestions to address this policy gap.
     
     
     
    Keywords: Biodiversity and ecosystem financing, Ecosystem Services, government expenditure, sub-national government, Biodiversity mainstreaming
     
    JEL Classification: Q5
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Fiscal Federalism, Expenditure Assignments and Gender Equality

  • Mar, 2021
  • Authors Lekha Chakraborty
  • Details NIPFP Working Paper No. 334
  • Abstract
    We analyse the theoretical and empirical constructs of federal fiscal relations and present a roadmap to integrate gender in fiscal federalism. Applying an “equally distributed equivalent” methodology, gender equality is measured for this purpose. This also involves an analysis of the institutional space through a  “gender lens”, especially in the tax and expenditure assignments as well as the intergovernmental fiscal transfers. We arrive at the following four inferences. One, fiscal federalism, theoretically, is neither good nor bad for gender equality. The impact of fiscal federalism on gender equality outcomes depend on the interface between institutional design and intergovernmental fiscal transfers. Two, with the progress of federal governance and fiscal decentralization, significant expenditure assignments that are important for gender equality including health care, labour and education are given importance in the gender budgeting design. Three, the fiscal allocations relate to eliminating the statistical invisibility of unmonetised care economy labour that may promote women’s economic empowerment need further emphasis. Four, the system of taxation and tax policy design are relevant to gender equality. However, evidence suggests that differential tax system and tax exemptions cannot correct gender inequalities. Five, in addition to integrating gender criteria in the tax-transfer formula, the fiscal federalism arrangements such as specific-purpose grants to subnational governments can promote gender equality. 
     
    Keywords: Fiscal federalism, gender equality, intergovernmental fiscal transfers 
     
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Ecological Fiscal Transfers and State-level Budgetary Spending: Evidence for The Flypaper Effects in India

  • Mar, 2021
  • Authors Amandeep Kaur, Ranjan Kumar Mohanty, Lekha Chakraborty, Divy Rangan
  • Details NIPFP Working Paper No. 332
  • Abstract
    Against the backdrop of the covid-19 pandemic, the paper explores the empirical evidence for flypaper effects in the ecological fiscal space in India. Using the panel data models, we analyse whether the intergovernmental fiscal transfers or the states’ own incomedetermine the expenditure commitments on ecology at the State level. The econometric results show that the intergovernmental fiscal transfersrather than the states’ own incomedetermines ecological expenditure at subnational levels in India. The results hold, when the models are controlled for ecological outcomes and demographic variables. 
     
    Keywords:Intergovernmental Transfers, Flypaper effect, Environmental Economics, Macroeconomic Policy, National Government Expenditures
     
    JEL Classification: E6, H5,H7,Q5
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The Economy as Reflected in Income Tax Data

  • Mar, 2021
  • Authors R Kavita Rao
  • Details NIPFP Working Paper No. 330
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Grievance Redress by Courts in Consumer Finance Disputes

  • Mar, 2021
  • Authors Karan Gulati and Renuka Sane
  • Details NIPFP Working Paper No. 331
  • Abstract
    This paper studies how courts in India have dealt with consumer finance disputes.  It presents the organisation of the courts that hear consumer finance cases. It reviews the 60 most cited cases to study the position that courts have taken in banking and insurance disputes. For the cases studied, it finds that courts have generally granted relief to consumers in banking disputes. In the case of insurance, courts have emphasised contractual compliance. This is so even if the contracts themselves were opaque or had unfair terms. The paper also finds that courts award low compensation and take a long time for adjudication. It suggests that courts should put in place systems to facilitate class action suits and bring in specialisation to deal with consumer finance disputes.
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Dam Safety in India

  • Mar, 2021
  • Authors Devendra Damle
  • Details NIPFP Working Paper No. 329
  • Abstract
    India has 5334 large dams; the largest number of dams in the world after USA and China. This number is set to increase in the coming years as India constructs more dams to meet the rising demand for electricity and water. Constructing dams exposes downstream areas to the risk of catastrophic flooding — in the event the dam fails or water has to be released in an emergency. Adopting risk-based decision-making systems for making policy, implementation and management decisions regarding dams are crucial for mitigating this risk. Conducting dam break analyses is a basic requirement for creating such a system. In the existing regulatory system, clearance for constructing new dams requires the builder to conduct a dam break analysis. However, there is no standardisation in how the dam break analyses are conducted and reported. It is also unclear how many projects actually comply with this requirement. There is no statutory requirement for conducting a consequence analysis to estimate the likely loss of life and property, and economic damage in the event of dam failure. Existing design standards for dams are not based on the risk created by the dam, but rather on their heights and storage capacities. Further, there is no centralised system for documenting and reporting actual dam failures, which is another crucial component of dam risk mitigation. Putting in place systems for regularly conducting dam break analyses, regular reporting of dam failure events, and ready public availability of such data is a necessary precondition for the development of risk-based decision-making systems to mitigate risk from dams.
     
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Macroeconomic Framework of Union Budget 2021–22: Reconsidering the Fiscal Rules

  • Mar, 2021
  • Authors Lekha Chakraborty
  • Details NIPFP Working Paper No. 328
  • Abstract

    Extraordinary times require extraordinary policy responses. Against the backdrop of macroeconomic uncertainty due to the CoVID-19 pandemic, the union finance minister has announced a high fiscal deficit of 9.5% of gross domestic product (GDP) in revised estimates (RE) 2020–21. This is against the pegged deficit of 3.5% in budget estimates (BE) 2020–21. Simultaneously, the finance minister has also announced an excessive deficit procedure to bring down the high fiscal deficit to 4.5% of the GDP by financial year (FY) 2026. High deficit has no fiscal costs if it can be substantiated with increased public investment or “output gap” reduction. When the monetary policy stance has limitations in triggering growth through liquidity infusion and the status quo policy rates, “fiscal dominance” is crucial for sustained growth recovery.

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Pandemic and GST Revenue: An Assessment for Union and States

  • Dec, 2020
  • Authors Sacchidananda Mukherjee
  • Details NIPFP Working Paper No. 327
  • Abstract
    Uncertainties surrounding GST collection in financial year 2020-21 have heightened due to ongoing COVID-19 pandemic. Given that economic activity is gradually returning to pre-pandemic levels, this paper projects overall as well as state-wise GST collection for 2020-21. The estimated GST collection of 2020-21 is the sum of realized GST collection during April to October 2020 and projected GST collection during November 2020 to March 2021. The study builds different scenarios based on monthly (year-on-year) growth experience with different assumptions about the likely base of GST collection for the remaining months of the current fiscal year. The revenue gap is estimated for states by taking the difference between the projected GST collection and revenue under protection in GST for 2020-21. The difference between the projected GST compensation cess collection in 2020-21 and sum of the revenue gaps of states provides the expected additional revenue requirement for full GST compensation payments to states. Acknowledging that a part of revenue loss is due to the pandemic, and that the compensation mechanism to fill the shortfall for 2020-21 and coming years is still evolving in the GST Council, present paper contributes to the ongoing debate on GST compensation requirements of states by projecting alternative set of numbers for the year 2020-21. As per our estimates, shortfall in GST compensation fund is expected to be Rs. 1.95 lakh in the best case scenario as against Rs. 2.35 lakh crore estimated by the GST Council. In the worst case scenario, the shortfall will be Rs. 2.45 lakh crore for the fiscal year 2020-21.       
     
    Key Words: Revenue Projection, Goods and Services Tax (GST), Revenue Under Protection (RUP), GST Compensation, Tax Effort, Tax Compliance, India.   
     
    JEL Classification: H25, H71, H68, C53
     
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Factors Influencing Access to Formal Credit of Unincorporated Enterprises in India: Analysis of NSSO’s Unit-level Data

  • Dec, 2020
  • Authors Shivani Badola and Sacchidananda Mukherjee
  • Details NIPFP Working Paper No. 326
  • Abstract
    Unincorporated enterprises significantly contribute to India’s GDP and generate large scale employment. Lack of access to formal credit often constrains enterprises to scale up. Understanding factors influencing access to formal credit of unincorporated enterprises is important which may help enterprises to improve performance and become credit worthy. For creditors, present analysis may help to broad base the criteria in selection and disbursement of credit to enterprises. The present paper explores the factors which influence access to formal credit of unincorporated enterprises across states in India. Results show that various operational and economic characteristics influence the access to formal credit. The analysis indicates that size of an enterprise (measured in terms of number of workers, total assets, etc.), gross value added, turnover, maintenance of written and bank account, years of operation, internet usage, female entrepreneur, registration under various acts/authorities, ownership type, enterprise type, type of activities (manufacturing, services or trading), enterprises facing problems, government assistance, state specific variables etc. are statistically significant factors.
     
    Key words: Unincorporated enterprises, outstanding loan liabilities, access to formal credit, informal credit, Probit Model, India
     
    JEL Classification: E44, E51, G20, G21, L53
     
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Four years of the inflation targeting framework

  • Nov, 2020
  • Authors Ila Patnaik and Radhika Pandey
  • Details NIPFP Working Paper No. 325
  • Abstract
    In 2016, India adopted a flexible inflation targeting framework. A six member MPC, with three internal and three external members was set up to determine the policy rate to achieve the inflation target. The CPI based inflation target was set by the Government at 4 percent with a tolerance band of plus/minus 2 percent for the period from August, 2016 to March, 2021. The review of the target is due in a few months. The tenure of the first MPC came to an end with the August, 2020 meeting. In this backdrop, this paper presents a review of the inflation targeting framework in India.
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Income elasticity of demand for health care and it’s change over time: Across the income groups and levels of health expenditure in India

  • Oct, 2020
  • Authors Jay Dev Dubey
  • Details NIPFP Working Paper No. 324
  • Abstract
    This study computes income elasticity of out-of-pocket healthcare expenditures of Indian households both across the income groups using the Spline regression model and across the level of health expenditure based on the Quintile regression technique using survey data collected in 2014 and 2018. Healthcare is found to be a necessary good in all cases, with significant decline in its income elasticity over time. The changes from 2014 to 2018 makes income elasticity higher for lowest income group compared to other income groups for all forms of health expenditure in rural areas and for outpatient and non-medical expenditure in urban areas. The overall trend for total health expenditure and outpatient expenditure implies that in times of severe health crisis needing expensive treatments, any income increase would lead to higher increase in health expenditure compared to minor health care needs, leading catastrophic health expenditure and impoverishment in case of poor households.
     
    Keywords: Healthcare expenditure, Income Elasticity Spline Estimation, Catastrophe, Quintile Regression
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Forecasting Consumer Price Index Inflation in India: Vector Error Correction Mechanism Vs. Dynamic Factor Model Approach for Non-Stationary Time Series

  • Oct, 2020
  • Authors Rudrani Bhattacharya, and Mrigankshi Kapoor
  • Details NIPFP Working Paper No. 323
  • Abstract
    Short to medium term forecasting of inflation rate is important for economic decision making by economic agents and timely implementation of monetary policy. In this study, we develop two alternative forecasting models for Year-on-Year (YOY) inflation in Consumer Price Index (CPI) in India using a large number of macroeconomic indicators. The YOY CPI inflation and its predictive indicators are found to be nonstationary and cointegrated. To address this issue, we employ Vector Error Correction Model (VECM) and Dynamic Factor Model (DFM) modified for non-stationary time series to forecast CPI inflation. We find that in terms of Root Mean Square Error (RMSE), the VECM model performs marginally better than the DFM model. However, both models are found to have the same predictive accuracy using Diebold-Mariano test.
     
    JEL Classification: C32, C53.
    Keywords: CPI Inflation, India, Forecasting, Vector Error Correction Model, Dynamic Factor Model.
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Building Infrastructure to Promote Inclusive Growth

  • Oct, 2020
  • Authors Rudrani Bhattacharya, Abhijit Sen Gupta and Satadru Sikdar
  • Details NIPFP Working Paper No. 321
  • Abstract
    Globally infrastructure has been found to play a significant role in promoting inclusiveness and growth through various channels. These include reducing the cost and improving the quality of intermediate inputs, enlarging the market size and allowing greater competition, and improving access to public services and economic opportunities. In this paper, we empirically investigate the role played by infrastructure development in improving living standards across major states in India. We explore the role of infrastructure development in four sectors, viz. electricity, roads, education and health, in enhancing income growth and facilitating poverty reduction. Instead of focusing on the commonly used infrastructure expenditure as a measure of infrastructure development, we construct infrastructure indexes for each sector using an array of physical indicators for that sector. This helps us overcome the inaccuracies that can arise due to inefficiency, leakage, corruption and weak government procurement policies. We find that infrastructure development across roads, electricity and education sectors, significantly bolster economic growth. On the other hand, infrastructure development across electricity, health and education sectors substantially assist in poverty reduction, even after accounting for the impact of major social welfare schemes. We conclude by highlighting some broad measures to enhance infrastructure investment.
     
    JEL Classification: C3, I15, I25, O11.
    Keywords: Infrastructure, Income growth, Poverty, Panel VAR, India.
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What do we gain from Seasonal Adjustment of the Indian Index of Industrial Production (IIP)?

  • Oct, 2020
  • Authors Radhika Pandey, Amey Sapre and Pramod Sinha
  • Details NIPFP Working Paper No. 322
  • Abstract
    In this paper we conduct a seasonal adjustment (SA) of the 2011-12 base series of Index of Industrial Production (IIP). We use the x-13 ARIMA-SEATS iterative process and follow an indirect approach of first identifying seasonality at the product level and then recompile the manufacturing index with seasonally adjusted series. The SA process shows identifiable seasonality in 206/405 (50%) items spread within broad NIC groups of food, beverages, textiles, leather & apparels. Seasonally adjusted levels also provide a smooth and low fluctuation series that can be used for extrapolation in the advance and provisional estimate stage of GDP estimates. However, the SA process reveals several data quality issues of inexplicable outliers, growth rates and changes in pattern of individual items. While seasonal adjustment has advantages, the process pre-supposes pristine data quality and given the trends shown by item level data, both the SA and actual IIP are inadequate in explaining the growth performance of the manufacturing sector.
     
    Keywords: Seasonal Adjustment, X-13 ARIMA-SEATS, Index of Industrial Production, Fluctuations, India
     
    JEL Classification: C43, C50, P44
     
    Acknowledgments
     
    We are thankful to Pronab Sen and GC Manna for helpful comments and suggestions.
     
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Centre-State Spending on Elementary Education: Is it Complementary or Substitutionary?

  • Sep, 2020
  • Authors Sukanya Bose, Manasi Bera and Priyanta Ghosh
  • Details NIPFP Working Paper No. 320
  • Abstract

    The objective of this paper is to empirically address the question of Centre-State relation in financing elementary education.  The idea of financial concurrency in financing education and the experience of various centrally sponsored schemes provides the historical context for the analysis. The empirical question focuses on the impact of SSA’s central grants on States’ spending behaviour. Is the relationship complementary or substitutionary? The paper also explores the impact of the 13th Finance Commission’s grants for elementary education.  The results indicate that the central grants for SSA (and the 13th FC grants) has a complementary impact on State’s spending, though the incremental effect varies across states. The results are particularly pertinent for the 16 focus States, which have large additional financial requirements. It is important to restore financial concurrency between the Centre and the States, for universalization of elementary education of an equitable quality, a task that is far from over. We also argue for a specific purpose grant by the 15th Finance Commission based on equalisation principle.

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Impact of Covid-19 on the Indian Economy: An Analysis of Fiscal Scenarios

  • Sep, 2020
  • Authors Ila Patnaik and Rajeswari Sengupta
  • Details NIPFP Working Paper No. 319
  • Abstract
    Amidst the economic slowdown triggered by the outbreak of the Covid-19 pandemic in India there have been many demands for the government to announce a large fiscal stimulus to support the economy. Economic growth and tax revenues remain uncertain in 2020-21 making it challenging for the government to finance any addition to the fiscal deficit. In this paper we work out alternative scenarios of fiscal deficit for 2020-21. We find that in our baseline scenario, assuming a 5% contraction in real GDP and a 14.4% contraction in net tax revenue, fiscal deficit of the central government will be 6.2% of GDP. 
     
    JEL classification: E6, H2, H5, H6 
     
    Keywords: Fiscal deficit, Covid-19, Fiscal projections, Government borrowing, Tax revenue.
     
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Reverse Migration during Lockdown: A Snapshot of Public Policies

  • Sep, 2020
  • Authors Satadru Sikdar and Preksha Mishra
  • Details NIPFP Working Paper No. 318
  • Abstract

    The imposition of a nation-wide lockdown in India in response to the novel COVID-19 pandemic has appropriately been lauded as an effective pre-emptive strategy. However, a distressing pitfall has been the massive ‘reverse migration’ of migrant workers from the destination centres in an attempt to escape starvation brought on by sudden collapse of employment and lack of effective social protection mechanisms. The pandemic has brought to the forefront of policy discussions not only the immediate issues of this particularly vulnerable group but also the broader issues pertaining to their identification and informal employment conditions. Within the migrant workers, the inter-state migrant workers have been especially affected due to non-portability of entitlements. This paper aims to analyse the migration trends on the basis of available data from the Census of India 2001 and 2011 and to critically examine the current Public policies (Union and state governments) to address the new emerging challenges – provision of immediate relief to migrants, employment generation in source centres to sustain the in-migration and incentivising the ‘city makers’ to return to the destination centres. The paper, further, attempts to assess the issues of sufficiency and feasibility of the public policies in this regard.

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Role of National Health Mission in Health Spending of States: Achievements and Issues

  • Aug, 2020
  • Authors Mita Choudhury and Ranjan Kumar Mohanty
  • Details NIPFP Working Paper No. 317
  • Abstract

    The current phase of the National Health Mission is scheduled to end by 2021, and the next phase of the scheme is around the corner. This paper undertakes an analysis of the contributions of the scheme in health spending of States, and highlights specific factors affecting them. The analysis suggests that the scheme contributed to reduction of inequality in health spending across states and added funds to the lower tiers of the health pyramid. The contribution of the scheme was however, limited in strengthening health systems in relatively poor performing ‘high-focus’ states. Lack of complementary inputs in states, capacity issues and weak public financial management affected the performance of the scheme. The paper throws light on some of the issues that need attention in the next phase of the scheme. 

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Moving to Inflation Targeting

  • Aug, 2020
  • Authors Ila Patnaik and Radhika Pandey
  • Details NIPFP Working Paper No. 316
  • Abstract
    India adopted a flexible inflation targeting framework as a formal legal mandate of the RBI in March 2016. The preamble to the RBI Act, as well as relevant sections in the Act were amended to enable this change. The frame- work entailed many details such as on the rate of inflation to be targeted, the band, the measure, the composition of the Monetary Policy Committee and the objective. One of these sections require that the rate of inflation to be targeted needs to be reviewed every five years. In March 2021, the central government along with the RBI is required to review the target. This paper presents the logic and rationale of the various elements of India’s inflation targeting framework.
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Equity in Intra-State Distribution of Public Spending on Health: The Case of Bihar and Tamil Nadu

  • Jul, 2020
  • Authors Mita Choudhury and Jay Dev Dubey
  • Details NIPFP Working Paper No. 315
  • Abstract
    Equitable distribution of public spending has been argued to be an effective tool for enhancing access to health care and moving towards Universal Health Coverage. In India, much of the existing evidence on equity in public spending has been confined to state-level aggregates, and intra-state distribution of public spending has received limited attention. This paper focuses on the distribution of public spending on health within two Indian States (Bihar and Tamil Nadu) to provide insights on differential access to health care within each state. The analysis suggests that public spending on health is pro-rich in Bihar, and plays a relatively weak redistributive role. In contrast, the distribution of public spending on health in Tamil Nadu is strikingly pro-poor, particularly at lower levels of care. In both horizontal and vertical dimensions (across districts and levels of health care), inequity in public spending is significantly higher in Bihar than in Tamil Nadu. 
     
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Problems with the e-Courts data

  • Jul, 2020
  • Authors Devendra Damle and Tushar Anand
  • Details NIPFP Working Paper No. 314
  • Abstract
    The creation of the e-Courts platform for disseminating data from the subordinate judiciary was an important step in making Indian courts more transparent. This platform has also prompted an interest in data-driven research on courts. While the e-Courts platform is a major reform in itself, there are numerous obstacles in successfully using this data for research. Previous work has pointed out that the data has standardisation issues, particularly in case-type nomenclature. It has also been shown that other fields, such as statute names and section numbers, are missing in some cases. In this paper, we quantify these error rates, which have so far only been known to exist anecdotally. We also identify new issues with the data, notably issues with wrong data being entered in certain fields. We report and quantify problems with mismatches between case-types and statute names, missing and malformed data in the statute name, section number, and date-time fields. We also show variations in error rates across states. The Indian Supreme Court eCommittee has taken cognisance of and initiated interventions to address some of these issues. However, the fundamental cause of bad quality data, viz. the lack of systematic data quality reviews and capacity building for the same does not seem to be part of the committee’s plans. Until these quality issues are addressed, the use of this data for research will be limited.
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Did public investment crowd out private investment in India?

  • Jul, 2020
  • Authors Honey Karun, Hrishikesh Vinod, and Lekha S. Chakraborty
  • Details NIPFP Working Paper No. 312
  • Abstract
    Our paper uses the ME (Maximum Entropy) bootstrap method to overcome the econometric constraints of using a short time series after the publication of a new macroeconomic series in India. We use a short time series (quarterly data) of stationary and nonstationary variables between 2011-2016 to confirm the positive role of public infrastructure investment. The significant result has policy implications in terms of the current debate, whether public investment ‘crowds-in’ rather than ‘crowds-out’ private corporate investment in India. 
    JEL Classification: E62, C32, H62
     
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Natural Resources Revenue Buoyancy in India: Empirical Evidence From State-specific Mining Regime

  • Jul, 2020
  • Authors Lekha S. Chakraborty, Emmanuel Thomas, and Piyush Gandhi
  • Details NIPFP Working Paper No. 313
  • Abstract
    The dynamics of natural resources revenue – the payment due to the sovereign owner (government) in exchange for the right to extract the mineral substance – is complex, how it is fixed and paid. It is controversial and significant, as it is a revenue that is unique to the resources sector and also that has been fixed and paid in multiple extractive tax regimes, sometimes on the measures of profitability, but more often based on ad valorem (value based) or the unit of the mineral extracted. We try to analyse how dynamic revenue from natural resources across the States in India , within a comparative framework with other (direct and indirect) taxes. Using the ARDL methodology, we have tried to estimate the revenue buoyancy within States and between the States in a panel, and analysed the short run and long run coefficients and their speed of adjustment. Using HP filter, we tried to estimate the potential GDP, and also analysed the cyclicality of revenue buoyancy using output gap variable across states. Our findings revealed that revenue from natural resources is a buoyant source of revenue, though there is distinct State-specific differentials. The policy implication of our study for the natural resources sector is the rate rationalisation as higher rates revised upward every three years through Royalty Study Group by Government of India can affect the revenue augmentation if Laffer Curve starts operating and in turn it affects the firm level competitiveness. The decision of shifting the mining regime from tonnage regime to ad-valorem regime for non-atomic non-ferrous is welcome, as it is market-linked. 
     
    Keywords: Natural resources taxation, Buoyancy, ARDL, Mining regime
     
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Biodiversity Conservation in India: Mapping Key Sources and Quantum of Funds

  • Jul, 2020
  • Authors Rita Pandey, Manish Gupta, Paavani Sachdeva, Abhishek Singh and Shivali Sugand
  • Details NIPFP Working Paper No. 311
  • Abstract
    India being a signatory to CBD is mandated to achieve biodiversity targets according to a time line, which requires a credible action plan, funds, and a smart implementation strategy. While India has a National Biodiversity Action Plan, it lacks a Biodiversity Finance Policy/Plan ─ key to identifying, current funds flow, periodic and continuous additional finance needs as well as resource mobilization strategies. Biodiversity finance in India, is highly fragmented, lacks a clear policy and a road map. Multiple institutions are involved in directing finance often with overlapping functions and no systematic tracking. While a couple of studies have attempted to map the sources and quantum of funds towards biodiversity conservation, there is no comprehensive estimate of total budgetary funding in India for this purpose. This paper not only fills this gap but also estimates the flow of funds from externally aided projects and from corporate sector through CSR and other compliance mandates. The paper uses a modified ‘Rio-marker’ methodology and ‘Budgetary data on Actual Expenditure’ on biodiversity in the analysis thus contributes to both theoretical and empirical literature on the subject. The analysis shows that the majority of BD management is through government Budget support, supplemented by externally aided projects, corporate sector, and Civil Society. The paper shows that a template for tracking and tagging biodiversity expenditure is necessary in institutionalizing this process and thus moving towards a credible biodiversity finance plan.
     
    Keywords: Biodiversity financing, government expenditure, sub-national governments, Maharashtra, India
    JEL Classification: Q5
     
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Goods and Services Tax Efficiency across Indian States: Panel Stochastic Frontier Analysis

  • Jul, 2020
  • Authors Sacchidananda Mukherjee
  • Details NIPFP Working Paper No. 310
  • Abstract
    In public finance, estimation of tax potential of a government – either federal or provincial – has immense importance to understand future streams of tax revenue. Tax potential depends on tax capacity and tax effort (TE) and therefore joint estimation of both the functions is desirable. There are several frameworks to estimate tax capacity and tax efficiency (tax effort); in the present paper time variant truncated panel Stochastic Frontier Approach (SFA) is adopted to estimate the functions jointly for the period 2012-13 to 2019-20. The findings of the study could be useful for policy and especially for the sitting Fifteen Finance Commission. The results of the study show that GST capacity of states depends on size and structural composition of the economy. Introduction of GST has reduced states’ GST capacity and the impact is restricted to scale only. The study has used data from GST Network (GSTN) database for the post-GST period and given all other factors at their levels, GSTN data shows lower GST capacity for high income states and higher capacity for low income states. The relationship between per capita income (PCI) of states and tax efficiency is non-linear and as PCI rises TE falls and thereafter it rises. Minor states (special category states and UTs with legislative assembly) have lower tax efficiency. Delhi and Goa have the highest GST gap and on average major states could increase their GST collection by 0.52 percent of GSVA and minor states by 1.15 percent if they increase their tax efforts.                  
     
    Key Words: Tax capacity, Tax efficiency, Goods and Services Tax (GST), Value Added Tax (VAT), Stochastic Frontier Approach, Panel Data Analysis, States of India.  
    JEL Codes: H21, H71, H77
     
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Responding to the new coronavirus: An Indian policy perspective (Submitted on March 11, 2020)


Addressing Air Quality Spurts due to Crop Stubble Burning during COVID-19 Pandemic: A case of Punjab

  • Jun, 2020
  • Authors Rita Pandey, Shailly Kedia, and Anuja Malhotra
  • Details NIPFP Working Paper No. 308
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Impact of Negative Interest Rate Policy on Emerging Asian markets: An Empirical Investigation

  • Jun, 2020
  • Authors Abhishek Anand and Lekha Chakraborty
  • Details NIPFP Working Paper No. 307
  • Abstract
    In last few years, several central banks have implemented negative interest rate policies (NIRP) to boost domestic economy. However, such policies may have some unintended consequences for the emerging Asian markets (EAMs). The objective of this paper is to provide an assessment of the domestic and global implications of negative interest rate policy. We also present how the implications differ from that of quantitative easing (QE). The analysis shows that the impact NIRP is heterogeneous; with differential impacts for big Asian economies (India and Indonesia)and small trade dependent economies (STDE) (Hong Kong, Philippines, South Korea, Singapore and Thailand). Nominal GDP and exports are adversely impacted in EMs in response to NIRP, especially in India and Indonesia. The inflation goes significantly high in EMs in response to plausible negative interest rates but the impact is much more severe for India and Indonesia than in STDEs. The local currencies also depreciate in all EAMs in response to negative interest rates. QE, on the other hand, has no significant impact on inflation but nominal GDP growth declines in EAMs. The currency appreciates and exports decline. The impact is much more severe in big emerging economies like India and Indonesia.
     
    Key words: Negative interest rate policy, Quantitative easing, emerging economies
    JEL Classification codes: E52, E58.
     
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Exit at the Bottom of the Pyramid: Empirical Explorations in the Context of Elementary Schooling in Delhi

  • May, 2020
  • Authors Sukanya Bose, Priyanta Ghosh and Arvind Sardana
  • Details NIPFP Working Paper No. 306
  • Abstract
    The framework of exit and voice, a la Hirschman, is applied to understand the social phenomenon of exit at the bottom of the pyramid. As the dominant groups vote with their feet, the low fee private school (LFPS) is perceived to be offering parents from disadvantaged groups “school choice”. We attempt to establish the size of the LFPS sector, information about which is central to educational planning, regulation and implementation, but invisible in the official database. A methodology based on macro-survey data is formulated and then applied to Delhi that has a substantial underbelly of LFPSs. We find that the estimated size of the LFPS sector accounts for nearly half the share of the overall children attending private schools at the elementary level.
    Policy recommendation suggests concrete steps toward expansion of public schools through public investment estimated at 0.3-0.4% of GSDP of Delhi, and upgradation of the existing facilities towards well functional benchmarks as per the RTE design so as to provide a credible alternative to the LFPS sector.
     
    Keywords: Low Fee Private School, Affordability, Exit, Voice, RTE, Elementary Education, Education Policy.
    JEL Classification Codes: I21, I24, I28, H75
     
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Gender discrimination in devolution of property under Hindu Succession Act, 1956

  • May, 2020
  • Authors Devendra Damle, Siddharth Srivastava, Tushar Anand, Viraj Joshi and Vishal Trehan
  • Details NIPFP Working Paper No. 305
  • Abstract
    In India, statutes governing individuals on matters of personal law (marriage, divorce, inheritance, adoption) differ as per the religion of the individual. In this framework, matters of inheritance of property amongst Hindus, Buddhists, Jains and Sikhs are governed by the Hindu Succession Act, 1956 (HSA). This legislation applies to the transmission of all assets owned by Hindus.
     
    The provisions of the HSA discriminate against Hindu women by prescribing different rules for devolution of property held by men and women. These provisions have the effect of excessively, and unfairly prioritising the husband’s family in the scheme of devolution as compared to the woman’s own family, even when the property belongs to the woman. The legislation is a product of an era when it was inconceivable for Indian women to own and acquire property. However, these biases continue to be perpetrated upon Hindu women in India today.
     
    This discrimination is ultra vires of Articles 14 and 15 of the Constitution of India, it violates India’s commitments under the United Nations Convention on the Elimination of All Forms of Discrimination Against Women, and leads to several undesirable consequences especially in cases where the property in question is acquired by the woman through her own skill or effort. Indian legislation such the Goa Succession, Special Notaries and Inventory Proceeding Act, 2012 (GSSNIP) and Indian Succession Act, 1925 (ISA), and succession laws of developed countries are far more gender-equitable, and can serve as an inspiration for eliminating the gender-discrimination in the HSA.
     
    The efforts, so far, to reform the HSA on this particular matter have been myopic at best. We provide a principles-based approach to comprehensively amend the HSA, to remove the gender discrimination in devolution of property. We propose a draft amendment to the HSA to effect this reform
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COVID-19: Global Diagnosis and Future Policy Perspective

  • May, 2020
  • Authors Divy Rangan and Lekha Chakraborty
  • Details NIPFP Working Paper No. 304
  • Abstract
    We analysed the macroeconomic policy responses to COVID-19 pandemic and the impact of the pandemic on economic growth, and the level of consumption. The COVID-19 crisis is a dual crisis - public health crisis and a macroeconomic crisis. The policy responses to this crisis have been a ‘life versus livelihood’ sequencing and the findings are such that global cooperation, and domestic macroeconomic policies complementing with exit strategy to solve the economic disruptions in supply chains can be helpful.
     
    Keywords: COVID-19, Monetary Policy, Fiscal Policy, Macroeconomic Responses.
    JEL Classification Codes: E5, E6, I150
     
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Emerging Fiscal Priorities and Resource Concerns: A Perspective on Fiscal Management from Madhya Pradesh

  • Apr, 2020
  • Authors Pratap Ranjan Jena and Abhishek Singh
  • Details NIPFP Working Paper No. 303
  • Abstract
    State finances of Madhya Pradesh mirrors the fiscal situation of states in India and emerging challenges that include lack of buoyancy of internal revenue, prolonged slow economic growth and uncertainties regarding central transfers, and impact of recommendations of the 15th Finance Commission. While the State adhered to fiscal rules, the fiscal space available has been shrinking and coming years will test the ability of the Government to adhere to numerical fiscal targets and to avoid fiscal stress. The State’s achievement with regard to human development, particularly education and health indicators have not been impressive. The fiscal policy of the State Government in the future needs to be calibrated keeping these areas in consideration. The ability to generate resources and develop and implement clear fiscal strategy will lead to achieving stated goals. Building up of fiscal pressure at state level in recent years makes it imperative to improve efficiency of public spending to get best value from utilization of public resources. Government of Madhya Pradesh should utilize the opportunities available from the budgeting innovations initiated in earlier years for institutional development. 
     
    JEL Classification Codes: E62, H50, H61, H70, H71, H72, H76 
    Keywords:  Fiscal policy, Budgeting system, tax effort, public expenditure management, fiscal rules, MTEF
     
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COVID-19 and Macroeconomic Uncertainty: Fiscal and Monetary Policy Response

  • Apr, 2020
  • Authors Lekha Chakraborty and Emmanuel Thomas
  • Details NIPFP Working Paper No. 302
  • Abstract

    The macroeconomic uncertainty created by COVID-19 is hard to measure. The situation demands simultaneous policy intervention in terms of public health infrastructure and livelihood. Along with the global community, India too has announced its initial dose of fiscal and monetary policy responses. However, more fiscal–monetary policy coordination is required to scale up the policy response to the emerging crisis. Innovative sources of financing the deficit, including money financing of fiscal programmes, a variant of “helicopter money,” need to be explored.

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Performance Assessment of Indian GST: State-level Analysis of Compliance Gap and Revenue Growth

  • Mar, 2020
  • Authors Sacchidananda Mukherjee
  • Details NIPFP Working Paper No. 301
  • Abstract
    Revenue from Goods and Services Tax (GST) is not meeting budgetary targets for last two financial years and therefore it is important to understand the reasons behind shortfall in GST collection. Any shortfall in GST collection will not only impact fiscal management of the union government but also it will spill over to state finances in terms of lower tax devolution. Structural changes made in the GST, in terms of increasing GST threshold and reducing tax rates for a large number of goods and services may have helped to moderate the impact of GST on Indian economy, but the revenue impact of the policy decisions cannot be negligible. In addition, revenue impacts of changes made in administrative provisions and procedures in GST require assessment for future policy directions. Moreover, tax compliance under GST is not improving over time and therefore it is further delaying stabilization of GST. There are many challenges that tax administrations (both union and state tax authorities) are facing today in terms of complexities of GST Rules and Regulations and getting access to information for effective tax administration. Given the revenue importance of GST in overall public finance management in India, in-depth understanding the reasons for revenue shortfall could help the government devise policies to overcome the challenges. The challenges before Indian GST can be classified into design and structural aspects of GST and tax administration and compliance related. In this paper we assess compliance and revenue performance of states in GST and estimate GST compliance gap. 
     
    Key Words: Goods and Services Tax (GST), GST Compliance, Revenue Assessment of GST, Compliance Gap Analysis, GST Evasion, Indian States. 
     
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How Effective is Public Health Care Expenditure in Improving Health Outcome? An Empirical Evidence from the Indian States

  • Mar, 2020
  • Authors Ranjan Kumar Mohanty and Deepak Kumar Behera
  • Details NIPFP Working Paper No. 300
  • Abstract
    The literature on public health spending and health outcomes remain an important contribution in implementing public health policies in developing countries. The purpose of this study is to investigate the effects of public health expenditure on various proximate and ultimate health outcomes during 2005-2016 using panel fixed-effects models across 28 Indian States. The empirical results show that per capita public health care expenditure has an adverse effect on the infant and child mortality rate, malaria cases, and a favourable effect on life expectancy, immunization coverage across States, while this impact is relatively weak in the case of High-Focus States. The study is very relevant in the context of achieving the targets of Sustainable Development Goals and moving towards the universal health coverage at the State level in India. It suggests for enhancement of public health spending, and improvement of health infrastructure among the Indian States.
     
    Keywords: Public Health Expenditure, Life Expectancy, Infant Mortality, Child Mortality, Fixed Effects Model, Indian States
     
    JEL Classification Codes: H51, I10, I18, C23
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Fiscal Consolidation Ex-post the Escape Clause: A Call for “Excessive Deficit Procedure”

  • Mar, 2020
  • Authors Lekha Chakraborty
  • Details NIPFP Working Paper No.299
  • Abstract

    Launching an “excessive deficit procedure” in India is inevitable for growth revival. This is crucial especially when there is considerable ambiguity about why the “escape clause” was invoked in the Union Budget 2020 - whether to meet the shortfall in tax revenue emanating from the unanticipated fiscal outcomes of structural reforms or to boost the capital formation in the economy.

     

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The New Monetary Policy Framework – What it Means

  • Feb, 2020
  • Authors C. Rangarajan
  • Details NIPFP Working Paper No. 297
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Climate Change-responsive Public Expenditure in India: An Empirical Analysis

  • Feb, 2020
  • Authors Amandeep Kaur and Lekha Chakraborty
  • Details NIPFP Working Paper No. 298
  • Abstract
    The paper examines the links between national plan on climate change and the fiscal stance across sectors in the context of Union government in India, against the analytical backdrop of environmental federalism. We have mapped the National Action Plan on Climate Change in India to the Demand for Grants across all the ministries and departments to arrive at an estimate for the public expenditure on adaptation, mitigation and regulatory spending relate to climate change. The mapping of National Action Plan on Climate Change to the budgetary allocations across sectors undertaken in this paper is illustrative and openended. Given the data constraints, we identified that specifically targeted expenditure on climate change related programmes is around 5-6 per cent of total expenditure in the national budgets. However, there is significant deviation between the budget estimates and the actual spending. The fiscal slippage is analyzed to understand the Climate Change budget credibility. The sustainability of the link between fiscal stance and climate change depends on integrating budget codes in the classification of budgetary transactions, through a clear road map by the Ministry of Finance. As such, the financing of climate change is highly fragmented in India at sectoral levels and calls for a macroeconomic policy framework.
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Revisiting the Role of Fiscal Policy in Determining Interest Rates in India

  • Feb, 2020
  • Authors Ranjan Kumar Mohanty and N. R. Bhanumurthy
  • Details NIPFP Working Paper No. 296
  • Abstract
    The role of fiscal policy in affecting interest rates has been examined extensively in emerging market economies such as India. While the findings of the existing studies diverge, some suggesting crowding out while a few suggesting otherwise, the relationship is ever-evolving depending upon the structure of the economy and the strength of the financial markets. Hence, it is necessary to continuously validate some of the macro relations such as the relationship between fiscal policy and interest rates. Towards this, the present paper tries to revisit the empirical relationship by using the Structural Vector Autoregression and Toda-Yamamoto causality approach. The study tries to empirically examine and understand the transmission channel through which fiscal policy could affect short-term, medium-term and long-term interest rate in India. Our results suggest that the fiscal deficit has direct and indirect effects on the interest rates. While there appear to have a marginal impact in the short-term, however, through the indirect channel, i.e., through inflation, fiscal policy has a larger positive impact on interest rates in the long run. It also finds that shocks to foreign interest rate and inflation tend to increase interest rates in India. In terms of the policy, in the long run, there is a need for containing structural part of fiscal deficit within the Fiscal Responsibility and Budget Management (FRBM) framework. 
     
    Key Words: - Fiscal Deficit; Interest Rate; Structural Vector Autoregression (SVAR); India.
     
    JEL Classification Codes:  H62, E40, C32
     
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Convocation Address at Banaras Hindu University delivered on 23 December 2019, by Dr. Vijay Kelkar, Chairman, NIPFP

  • Jan, 2020
  • Authors Vijay Kelkar
  • Details NIPFP Working Paper No. 295
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Fiscal Prudence for What? Analysing the State Finances of Karnataka

  • Jan, 2020
  • Authors Jannet Farida Jacob and Lekha Chakraborty
  • Details NIPFP Working Paper No. 293
  • Abstract

    Karnataka is the first state in India to have introduced a fiscal rules framework, even before the central government had enacted the Fiscal Responsibility and Budget Management (FRBM) Act, 2003. The Karnataka Fiscal Responsibility Act was enacted in 2002. Karnataka is consistently fiscally-prudent with its revenue deficit-to-GSDP ratio reducing to near-zero and the fiscal deficit-to-GSDP ratio below 3%. How the state has achieved fiscal prudence? Is it through revenue buoyancy or through expenditure compression? Our analysis shows that the tax-to-GSDP ratio of the state is not increasing and it is around 7% of GSDP. As around 70% of state finances come from own revenue resources, has the declining buoyancy in “own revenue” prompted the state to go for selective expenditure compression to maintain fiscal prudence? Examining the expenditure side, we found that the state has compressed its capital expenditure and marginally decreased its spending on education and social welfare and nutrition. This has its ramification on the outcomes of education, on the one hand, in terms of declining enrolment at the primary level and increasing dropout rates in secondary level, and on the other hand, rendering Karnataka as one of the most vulnerable states in terms of nutrition (anthropometric) indicators. There seems to be a shift in the focus of public spending from education and health to water and sanitation, within the social sector budget. At this juncture, it is intriguing that the state, with comfortable levels of fiscal consolidation since 2005, has resorted to heavy off-budget borrowing to finance state programmes.  This has added to the already increasing ratio of interest payment to own revenue receipt, albeit off budget borrowing being hardly one percent of GSDP. The fiscal marksmanship analysis showed systematic bias in the forecasting of own tax revenue, grants and capital expenditure. This calls for the reduction in the volatility of intergovernmental fiscal transfers to the state as well as improving the assumptions and forecasting methodologies of the macro-fiscal variables like own tax revenue and capital spending.

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Macroeconomic Policy Coherence for SDG 2030: Evidence from Asia Pacific

  • Jan, 2020
  • Authors Lekha Chakraborty
  • Details NIPFP Working Paper No. 292
  • Abstract
    The paper analyses the macroeconomic policy coherence required for sustainable development goals (SDGs) in the context of Asia Pacific region. Specifically, the paper analyses the monetary, fiscal and structural policy reforms and suggest specific policy tools to integrate SDGs in macroeconomic policies. The analysis reveals that the transition of macroeconomic framework from ‘discretion’ to ‘controlled discretion’ and ‘rules’ acts as a constraint to integrate SDGs into the policy framework. In the region, the monetary policy is increasingly focusing on inflation targeting, while the fiscal policy is based on the threshold rules of fiscal deficit-GDP ratio. Within these constraints of the macroeconomic framework, a few countries in the region have identified specific policy tools to integrate SDGs within a ‘beyond GDP paradigm’- in particular using the tools of accountability like gender budgeting, the climate responsive budgeting and the strategies for financial inclusion.
     
    Key words: SDG, Macroeconomic policy coherence, Asia Pacific
     
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Possible Impact of Withdrawal of GST Compensation Post GST Compensation Period on Indian State Finances

  • Jan, 2020
  • Authors Sacchidananda Mukherjee
  • Details NIPFP Working Paper No. 291
  • Abstract
    Given the ongoing shortfall in GST collection and uncertainty associated with revenue on account of SGST collection, many states have approached the Fifteenth Finance Commission (FFC) for possible extension of the GST compensation period by another three years, i.e., up to 2024-25. Since the decision on possible extension of the GST compensation period is yet to be taken, it is important to assess possible impact of withdrawal of GST compensation beyond the transition period, i.e., beyond 30 June 2022, on Indian state finances. Any shock to state finances due to withdrawal of GST compensation after the GST transition period may have profound impact on India’s fiscal management and therefore macroeconomic stability. Since such impact assessment has not been carried out in Indian public finance literature yet, the present paper attempts to fill the gap.
     
    Even if the GST compensation period is extended beyond 30 June 2022, union government may not have adequate fiscal space to provide GST compensation to states at the ongoing annual growth rate of 14 percent, unless either tax buoyancy and/or nominal growth rate of GDP improves. Exploring a possible design of GST Compensation Cess may help the governments to reduce uncertainty (arbitrariness) in setting the growth rate of revenue protection and also provide inducement to states to put additional tax efforts to augment GST collection. Moreover, given the uncertainties associated with GST collection and possible recovery of Indian economy from the ongoing slowdown, a suitable design of GSTCC may release stress from the union finances on account of GST compensation payment obligation. 
     
    Key Words: Goods and Services Tax (GST), GST Compensation Cess, Revenue Protection, Fiscal Stress, Tax Design, Indian State Finances.
     
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Agri-Environmental Sustainability of Indian States during 1990-91 to 2013-14

  • Jan, 2020
  • Authors Sacchidananda Mukherjee
  • Details NIPFP Working Paper No. 290
  • Abstract
    Improving economic viability of Indian agriculture is contingent upon agri-environmental sustainability (AES). For agriculture, environment acts as a sink of pollution load as well as inputs for production. Objective assessment of environmental impacts of Indian agriculture and impacts of polluted environment on agriculture are crucial for AES. The costs of polluted environment on agriculture will be borne by farmers in terms of loss of productivity and quality of farm produces. Comprehensive assessment of economic costs of environment on Indian agriculture is lacking. On the other hand, unless internalize environmental impacts of agriculture will be borne by the society – in terms of depletion and degradation of water resources, land degradation and emissions of GHGs. Environmental impact of agriculture will be largely borne by vulnerable sections of the society who cannot afford to adopt pollution aversion practices (or technologies) to avoid health hazards. Moreover, marginal and small farmers may also not be able to mitigate the impact of polluted environment on their farmland by adopting various coping mechanism (pollution averting behavior). Therefore agri-envirionmental sustainability of Indian agriculture is important for wellbeing of Indian farmers.  
     
    In the absence of system of integrated environment and economic accounting (SEEA) in India, present paper builds a comprehensive agri-environmental sustainability index (AESI) based on 40 indicators to assess the potential (possible) impact of agriculture on environment. The study captures both spatial and temporal aspects of AES by covering 17 general category states for the period 1990-91 to 2013-14. The study comes out policy suggestions which could be useful to adopt sustainable agricultural practices. 
     
    Key words: agro-ecosystem & environment; agri-environmental sustainability; agri-environmental indicator; sustainable agriculture; environmental sustainability; Indian states. 
     
    JEL Classification Codes: Q56, Q15, C00
     
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India - Is the Tax System Neutral in India: An Analysis of Tax Treatment of Selected Funds

  • Jan, 2020
  • Authors Suranjali Tandon
  • Details Issue: Finance and Capital Markets (formerly Derivatives & Financial Instruments), 2020 (Volume 22), No. 1 IBFD
  • Abstract
    One of the fundamental principles of taxation is neutrality. In finance this assumes significance since the decision to invest must not depend on tax. It is also true that any departure from neutrality must be grounded in sound economic purpose. Neutrality is desirable for well-functioning financial markets. Investment funds form an integral part of financial markets. These can operate through different structures and invest in different asset classes. Some of these funds can channel resources to sectors that are considered key for growth and development. Selecting AIF, REIT, InvITs and securitization trusts in India the tax system is compared for these and evaluated. It is found that the existing structure is not neutral and this article presents scope for policy change.
     
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