ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Infrastructure and Fiscal Management

In India, fiscal consolidation is rule-based and focuses on deficits and debt. Macroeconomic concerns are not integrated with fiscal targets, which have been achieved at the cost of infrastructure investment. States have to use their revenues more effectively to spend on health and education, and borrow more to fund infrastructure. The centre must incentivise states to use their fiscal space effectively. A strategy for infrastructure investment by the central and state governments is discussed, especially in the context of the recommendations of the Fourteenth Finance Commission.

Economic Revival or Dead Cat Bounce?

Although growing at rates that are globally enviable, the Indian economy has been unstable over the last several years. False dawns, shifting time series, and the selective use of data has provided fodder for scoring political brownie points. Citing near-term data, the Economic Survey 2017–18 argues that the Indian economy is on the path of recovery even as it raises some red flags. What does a comprehensive appraisal of the data show? Is this “recovery” sustainable or is this yet another case of a dead cat bounce?

A Farewell to Arms

A former IAS officer looks back with mixed emotions at a career in the civil service that spanned the divide between two centuries.

Monetary Policy Dilemmas at the Current Juncture

Monetary policies in advanced economies and emerging markets face quite different challenges at the current juncture. In the advanced countries, current dilemmas derive from the normalisation of unconventional monetary policies. The short-term dilemma is to determine when to start exiting extraordinary policies and selecting appropriate tools, as conventional tools may not be very relevant during this phase. The medium- to long-term challenges relate to the sequencing, pace and mechanics of normalisation. Monetary policy in emerging markets needs to cope with the familiar dilemmas of fiscal dominance, the growth-inflation trade-off and the "impossible trinity." With fiscal parameters in control, and food and commodity prices subdued, the chief dilemma currently confronting emerging markets involves a trade-off between targeting divergent domestic and external cycles. Although they are now better placed to absorb a sudden stop, the impact is likely to be differential, with those with weaker macroeconomic parameters suffering greater pain.

Deconstructing Indian Monetary Policy through the Taylor Rule

It is meaningful to evaluate the Reserve Bank of India's monetary stance through the prism of the Taylor Rule, even if it is inadvisable to apply it mechanically.

Public Financial Crisis

Financial and Fiscal Policies: Crises and New Realities by Y V Reddy, Narayan Valluri and Partha Ray; New Delhi: Oxford University Press, 2014; pp xviii and 344, Rs 995.

Quantitative Easing and the Helicopter Drop

Over the last few decades economists and policymakers came to regard macroeconomic policies as the holy grail that could smoothen business cycles. This confidence has been badly shaken in the aftermath of the global financial crisis. Aggressive and unconventional monetary policies have been unable to put Humpty Dumpty back on the wall again. This article examines the working and possible implications of quantitative easing and the helicopter drop, the two unconventional monetary policies beyond the prevailing zero bound policy rates in advanced economies.

Unravelling of the Bretton Woods Twins

The Bretton Woods twins - the International Monetary Fund and the World Bank - have become largely irrelevant for both developed and developing countries. The market has enthroned the US dollar as the international reserve currency, with little role for the IMF which has lost its role as international lender of last resort. And the0 World Bank's capital is inadequate to meet the massive requirements of infrastructure in the developing world.

The New Triad of Policy Concerns

Monetary Policy, Sovereign Debt and Financial Stability: The New Trilemma edited by Deepak Mohanty (New Delhi: Reserve Bank of India, Foundation Books, Cambridge University Press India), 2014, pp xiv + 370, Rs 995.

The Unravelling of Inflation Targeting

Inflation targeting as currently conducted by central banks in both developed and developing economies is breaking down. In the developed countries it is stymied by asset and credit bubbles and in developing countries infl ation targeting has been disrupted by the source of infl ationary pressures and volatile capital fl ows. Developing countries need to fi nd ways of targeting non-core infl ation, and also need to devise a separate policy instrument to target the external fi nancial cycle.

A Monetary Policy Rule for Emerging Market Economies

The recent global debate on monetary policy has centred on whether policy should target financial stability in addition to the domestic business cycle. With relatively tightly regulated fi nancial markets, where concerns presently are more developmental than regulatory, the counterpart debate in emerging market economies centres on reconciling two widely held economic policy formulations, namely, the Mundell-Fleming "Impossible Trinity" and the "Taylor Rule". This article argues that EMEs can get around the trilemma by adopting a separate0 instrument as part of a consistent policy framework to target the external financial cycle. This would free up their interest rate policies to target the domestic business cycle, without the need to deviate from the Taylor Rule from time to time to target external fi nancial stability.

Relevance of Keynesianism in the Post-Recession Period

Tracing the rise of Keynesian policies in the post-second world war years to its decline in the 1970s and 1980s with monetary policy playing a central role in macroeconomic stabilisation, this article examines its resurrection in the years following the global financial and economic crisis of 2007-08. It points out that at the heart of the present stimulus-austerity debate is the effectiveness of Keynesian stimulus policies during episodes of growth falling below potential, and classifi es growth crises into three different types for analytical clarity. Analysis shows that though the growth crisis in advanced economies has spilled over into developing ones through trade and investment channels, its nature is different. The focus in these countries should therefore be on addressing supply shocks and structural reforms, including investment in infrastructure, through a change in the fi scal mix.

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