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Calculating the Fiscal Deficit

Calculating the Fiscal Deficit R J Mody SHOULD any capital receipt be taken into account in the calculation of fiscal deficit is an important question that I S Gulati attempts to answer (Economic and Political Weekly, May 21). To quote, "Strictly interpreted, since fiscal deficit is the excess of total government expenditure, i e, expenditure on revenue and capital account taken together over government's current revenues, no item of receipts on capital account should be allowed for the calculation of fiscal deficit."1 The factremains, however, that when the two items of capital receipts Gulati confines himself to are taken into account, it implies a lower fiscal deficit than that calculated on the basis of the above definition. Thus fiscal deficit is equal to total government expenditure minus the sum of the receipts on current account and the above capital receipts.

Fiscal Deficit and Stabilisation Policy

IN my note on fiscal deceit ('On Defining the Fiscal Deficit EPW, September 21/1991) I attempted to focus on two points. Firstly, if price stability is the objective it is the budget deficit, as defined in India that is relevant and not the fiscal deficit. The present note gives empirical evidence based on international time- series cross-section data to support the above argument. It appears that the conditions for IMF loan require that fiscal deficit of the central government should be gradually reduced in order to contain inflation and to make devaluation effective in reducing the balance of payment deficit. It is argued here that this emphasis on fiscal deficit is misplaced.

On Defining the Fiscal Deficit

national one. In a recerit editorial of Leprosy Review, it was stated that "it is obvious that a priority of utmost importance globally is more rapid expansion of MDT...'' editorial, Leprosy Review (1989), Vol 60.

Enlarging the Scope of Money Markets

Enlarging the Scope of Money Markets R J Mody THE recent appointment of a working group by Reserve Bank to study the possibilities of enlarging the scope of the money market is a step in the right direction. The financial technology is underdeveloped in India. The development of financial assets, intermediaries and markets can improve the efficiency of resource allocation and help attain higher rates of economic growth. One reason why economic growth has been faltering in spite of higher rates of saving is that the financial mechanism allocating investible resources is underdeveloped.

Government Borrowing and the Monetary System

Government Borrowing and the Monetary System R J Mody V M DANDEKAR has criticised (January 25) the Chakravarty Committee for not telling the government the cardinal truth that it must obey financial discipline if price stability is an objective of economic policy. Instead, it is further stated, the committee has made recommendations which may "seek an easy solution in the market".

Financial Mechanism and Economic Growth

Financial Mechanism and Economic Growth R J Mody ASHUTOSH VARSHNEY has presented (EPW September 1) a report of the discussion that took place in a conference held at MIT on the 'Political Economy of Slow Industrial Growth in India'. The focus of the report is on the current debate on deceleration in the industrial growth since the middle of the 1960s. Two mutually reinforcing proximate explanations are given. The first deals with the deceleration in public investment and the second with the rise in capital-output ratios.

Saving and Demand for Money

8 Ibid. 9 Kundu and Moonis Raza (1982) have taken the terminal year classification as the basis for computing the growth rates. 10 See Narula (1981).
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