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

Articles By Zico Dasgupta

Monetary Policy in the Midst of Cost-push Inflation

The Reserve Bank of India adopted inflation-targeting monetary policy based on the New Keynesian 3-equation model. How realistic are the assumptions, and how effective have monetary policy instruments been in controlling the inflation rate? Given India’s structural specificities, what are the implications of cost-push inflation for policy rate and output gap? This paper addresses these questions by identifying alternative theoretical possibilities within a simple 3-equation model and locating the Indian specificity by estimating the Phillips curve and monetary policy rule equation. The analysis points towards the constraints of monetary policy in India due to presence of a flat Phillips curve and indicates the possibility of adverse effect on output gap due to presence of Taylor’s rule.

Income Distribution and Aggregate Demand in the Indian Economy

Does there exist a trade-off between labour income share and output growth rate? Or does a reduction in the wage share reduces the output growth rate? These questions remain central for analysing the impact of change in income distribution on the output growth rate. Since the dilution and suspension of labour laws involve exogenous changes in income distribution, the impact of such policies would depend on the relationship between income distribution and aggregate demand. This paper attempts to lay bare this relationship for the Indian economy through an empirical analysis of India’s macro data and a theoretical model based on the regression results.


Fiscal Problem in West Bengal

The fiscal picture in West Bengal is characterised by a high debt-gross state domestic product ratio (the second highest in the country among the non-special category states) and a low own tax revenue-GSDP ratio (the lowest in the country). This paper attempts to understand the reasons for these twin features which underlie the fiscal stress in the state.

The Challenges before NABARD in the Midst of RBI's Sterilisation Policy

Have huge inflows of speculative capital in the post-reform period affected the role of development institutions and banks like the National Bank for Agriculture and Rural Development, the apex bank for institutional credit in rural India? In order to prevent a possible appreciation of the currency, which would have had an adverse effect on the real sector of the economy, the Reserve Bank of India resorted to market intervention and the increase in the foreign exchange reserves, which would have caused a possible increase in the money supply, was neutralised by undertaking a "sterilisation" process. In the process, the rbi suffered a huge loss in its potential income and had to resort to a smaller transfer of funds to nabard. On the other hand, nabard, faced with an increasing demand for loans turned to open market borrowings at a higher interest rate, which ultimately led to a huge loss in its potential income. This paper finds that with the ongoing reforms, the banking system has not only sacrificed developmental aspects, but also failed to satisfy the profit norms of banking.