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

Articles By Lekha Chakraborty

Ecological Fiscal Transfers and State-level Budgetary Spending in India

The empirical evidence of flypaper effects in the ecological fiscal spending in India is examined. Using the panel data models, it is analysed whether the intergovernmental fiscal transfers, or the states’ own income, determine the expenditure commitments on ecology at the state level. The econometric results show that the intergovernmental fiscal transfers rather than the states’ own income determine ecological expenditure at subnational levels in India. The results hold when the models are controlled for ecological outcomes and demographic variables.

Fiscal–Monetary Interface and Green Bonds

If the Reserve Bank of India hikes the policy rates against the backdrop of the mounting geopolitical risks and infl ationary pressures, the growth recovery process may slow down. At the same time, keeping the status quo on policy rates for a prolonged period could catalyse the de-anchoring of infl ationary expectations. The Union Budget 2022–23 has accommodated high fi scal defi cits and has emphasised on “crowding-in” effects of public infrastructure investment. The intensity of global macroeconomic uncertainties on economic recovery in India can be lessened through sustainable fi scal and monetary policy coordination.

COVID-19 and Fiscal–Monetary Policy Coordination

Against the backdrop of the COVID-19 pandemic, the economic stimulus packages announced by the national government are analysed and an attempt is made to identify the plausible fiscal and monetary policy coordination. When credit-linked economic stimulus packages are partial in its impact on growth recovery, an accommodative fiscal policy stance in the forthcoming Union Budget 2022–23 is crucial for the economy.

 

COVID-19 Economic Stimulus and State-level Performance of Power Distribution Companies

As part of the COVID-19 economic stimulus package, the Government of India increased the borrowing limit of the states from 3% to 5% of the gross state domestic product. The power sector reform at the state level is one of the criteria to avail this extra borrowing. The efficiency parameters of the power sector are analysed here, and it is observed that there are statewise differentials in the financial and operational parameters. The average aggregate technical and commercial losses that should have been 15% by 2018–19, presently, on average, stand at 26.15%. The average cost of supply–average revenue realised has also widened. The operational parameters indicate widening inefficiencies across states in the power infrastructure.

 

Mainstreaming Climate Change Commitments through Finance Commissions

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.

 

Fifteenth Finance Commission Award for 2020–21

The first report of the Fifteenth Finance Commission has allayed many fears that arose after the notification of the terms of reference of the commission. The main report for the period 2021–22 to 2025–26 will have to factor in the devastating impact of COVID-19 on the economy and provide adequate fiscal space to the states for socio-economic response and recovery.

Impact of the Negative Interest Rate Policy on Emerging Asian Markets

In the last few years, several central banks have implemented negative interest rate policies to boost the domestic economy. However, such policies may have some unintended consequences for the emerging Asian markets. The analysis provides an assessment of the domestic and global implications of negative interest rate policy and how it differs from that of quantitative easing. It shows that the impact of nirp is heterogeneous, with differential impacts for big Asian economies (India and Indonesia) and small trade-dependent economies (Hong Kong, Philippines, South Korea, Singapore and Thailand). Quantitative easing, 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.

Covid-19 and Macroeconomic Uncertainty

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.