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

Capital account convertibilitySubscribe to Capital account convertibility

Demand-led Growth Slowdown and Inflation Targeting in India

A variety of indicators are presented to show that demand restricted output during the growth slowdown of 2011–17. The macroeconomic structure of the economy is such that a policy-induced demand contraction affects output more than it affects inflation. In this context it is important to evaluate the application of inflation targeting. Flexible inflation targeting was too narrowly and strictly implemented initially, although there are signs of moderation in 2018. Since inflation forecasts were biased upwards, the more effective expectations anchoring channel of inflation targeting was underutilised. The output sacrifice imposed was higher than necessary. Finally, possible mechanisms to ensure inflation targeting is implemented flexibly as required in the Indian context are discussed.

Foreign Finance, Real Exchange Rate, and Macroeconomic Performance in India

The paper examines whether financial inflows cause economic contraction in India through appreciation of the rupee. To this end, it formulates a structuralist macroeconomic model and calibrates it to India’s national income accounts. It then simulates and analyses an alternative scenario involving greater inflow of foreign finance. It is seen that real exchange rate appreciation, despite its negative effect on trade surplus, stimulates real wages and consumption demand. The paper does not endorse complete capital account convertibility but warns against a blanket approach towards different forms of foreign finance.

History from Below

Structure, Consciousness and Social Transformation: The Adivasis in Thane District, Maharashtra and The Subaltern Subject in Structured Historical Process by Denzil Saldhana, New Delhi: Aakar Books, 2015; pp 611 and 108, respectively, ₹ 1,695 and ₹ 295.

Governing Capital Flows

Ruling Capital: Emerging Markets and the Reregulation of Cross-Border Finance by Kevin P Gallagher; Cornell University, 2015; pp xi +233, $29.95.

Capital Account Liberalisation in India

This study attempts to explore the consequences for India of opening up the capital account. It builds a model to establish a formal link between capital flows and economic growth in the Indian context and reconciles the results from this model with the possible end-use of capital flows into different sectors.
Back to Top