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

Jeevan Kumar KhundrakpamSubscribe to Jeevan Kumar Khundrakpam

Have Economic Reforms Affected Exchange Rate Pass-Through to Prices in India?

This paper examines the behaviour of exchange rate pass-through to domestic prices in India after the reforms initiated in the early 1990s. Unlike observed in several countries, it finds a rise in exchange rate pass-through to domestic prices until recent years. Besides economic factors typically associated with economic liberalisation, the persistence of higher inflation is an important factor for the rise in pass-through.

Tax Buoyancy Estimates for Indian States

With the introduction of a destination-based VAT in all but eight states starting April 2005, there is need for a good baseline indicator of tax buoyancies in states in the period immediately preceding. This paper attempts to provide such a base, with buoyancies estimated over a 23-year span starting in 1980-81. If estimated over a sufficiently long period of time, the buoyancy coefficient essentially estimates the underlying revenuegenerating properties of the system with endogenised tax policy. A log linear trend fit over the entire period showed serial correlation, which is eliminated for all but one state, Assam, with the introduction of structural breaks. A third specification, including the log of the per cent share of industry in the domestic product, eliminates serial correlation for Assam, and improves the goodness-of-fit for some other states. In all but six states, the sign of the change in the buoyancy coefficient at the break is positive. Where the buoyancy-enhancing break occurs in the late 1990s, the spurt in tax effort might have been an endogenous response to the expenditure shock from implementation of the higher salary scales recommended by the Fifth Pay Commission.
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