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

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An Examination of Revenue Generation

The revenue side of the budget is scrutinised to understand if the government is being realistic about revenue generation in 2017–18. Clearly, there is over-optimism, given that economic growth will be slow. Too much is expected from voluntary disclosure and penalties, while incentives are not in place. It would make sense to allow some slippage in the deficit targets in order to revive the economy. In addition, the increasing problem of cesses is discussed with reference to the Krishi Kalyan Cess to assess whether cesses serve the purpose for which they are introduced.

Theoretical Analysis of ‘Demonetisation’

With the aid of simple theoretical tools used in classroom lectures, the implications of the recent “demonetisation” exercise in India are analysed. It lends support to conclusions reached by other authors on the impact of demonetisation with the aid of available data. Following Robert Lucas’s Nobel lecture, the merits of economic policies that assume the form of random shocks to an economic system are questioned. 

Demonetisation: 1978, the Present and the Aftermath

In the context of the demonetisation of ₹500 and ₹1,000 notes, the issuance of currency and its different denominations are traced over time, while also tracking key macroeconomic features of India's changing economy over the decades. Further, the possible immediate and longer term economic effects of demonetisation are discussed.

Rethinking Economics, Statistical System and Welfare

The paper picks up what can be called as a thread of discontentment in conventional macroeconomics through a brief review of literature, carefully chosen to bring home the importance of micro, to justify that it can give a realistic framework of analysis of the economy. To support research for validation of alternative theories challenging the rational approach, deeply rooted in the general equilibrium theory, we need empirical evidence linking the micro with the macro. The idea is to seek conformance of these theories based on ground realities and to consider institutions and governance as important components of this analysis. The existing statistical system in India needs to be reoriented following the System of National Accounts 2008 on microdata to capture distributional characteristics of macroaggregates. There is a new direction in applied econometrics based on the idea of stochastic equilibrium which is testable using microdata. The paper touches upon this idea citing a single work.

Estimates of High GDP Growth for 2015-16

In producing the new series, the Central Statistics Office with its rebased National Accounts Statistics has done a studious job of marshalling diverse sources of data and weaving them together into a composite new source. However, the final picture of NAS data would have been more acceptable if better caution was exercised in using new concepts as well as new sources of data, and in weighing the growth results against frequent and extensive revisions. The CSO has failed to refine the growth results juxtaposed against the repetitive and substantial revisions that the data sources have impelled and have completely ignored the analytical construct of gross domestic product at factor cost.

Macroeconomic Impact of Social Protection Programmes in India

Generally, the fiscal implications of social protection programmes are evaluated, but not so much on the economic impacts these schemes have on macro aggregates such as output, employment, income and revenue. This motivated us to evaluate the economic impact of three major social protection programmes, namely, the Mahatma Gandhi National Rural Employment Guarantee Act, Indira Awaas Yojana, and the National Social Assistance Programme in 2011-12 using a social accounting matrix. It is found that these programmes have significant impacts on output across different sectors of the economy, on income generation and distribution of different household classes in urban and rural areas, on employment across different sectors of the economy, and even on government revenue generation.

Contemporary Macroeconomic Analysis

Looking Back at Macroeconomics 101: A Ringside View of the Global Financial Crisis from Asia in Real Time by Alok Sheel; Academic Foundation, 2015; pp 422, ₹1,295.

IMF's Call for Complacence

The International Monetary Fund's World Economic Outlook of April 2016 bodes that emerging market economies, including India, are at risk of sudden capital outflows. The IMF once again makes a case for its conventional, much-discredited tools to manage this risk. To repeat these recommendations, that on many occasions have only worsened crises, is to encourage complacency.

Capital Account Management in India

India has been subject to capricious capital flows since its integration with the global capital markets in the early 1990s. In a bid to balance diverse objectives, India, like many other emerging markets, has resorted to active management of various types of capital flows. This paper finds that while the calibrated liberalisation approach resulted in altering the composition of capital flows towards more stable flows, and has helped India to negotiate the "Trilemma," the use of sporadic capital account management measures in the face of surge or stop of capital flows has not been very effective in achieving their objectives of reducing external vulnerability or mitigating macro-prudential risks.

Monetary Policy Dilemmas at the Current Juncture

Monetary policies in advanced economies and emerging markets face quite different challenges at the current juncture. In the advanced countries, current dilemmas derive from the normalisation of unconventional monetary policies. The short-term dilemma is to determine when to start exiting extraordinary policies and selecting appropriate tools, as conventional tools may not be very relevant during this phase. The medium- to long-term challenges relate to the sequencing, pace and mechanics of normalisation. Monetary policy in emerging markets needs to cope with the familiar dilemmas of fiscal dominance, the growth-inflation trade-off and the "impossible trinity." With fiscal parameters in control, and food and commodity prices subdued, the chief dilemma currently confronting emerging markets involves a trade-off between targeting divergent domestic and external cycles. Although they are now better placed to absorb a sudden stop, the impact is likely to be differential, with those with weaker macroeconomic parameters suffering greater pain.

Dynamic Stochastic General Equilibrium Modelling

In recent years Dynamic Stochastic General Equilibrium models have come to play an increasing role in central banks, as an aid in the formulation of monetary policy (and increasingly after the global crisis, for maintaining financial stability). DSGE models, it is claimed, are less a-theoretic than other widely used models such as VAR, or dynamic factor models. As the models are "structural," they are supposed to be immune to the Lucas Critique, and thus can be "taken to the data" in a meaningful way. However, a major feature of these models is that their theoretical underpinnings lie in what has now come to be called as the New Consensus Macroeconomics. Using the prototype real business cycle model as an illustration, this paper brings out the econometric structure underpinning such models. A detailed analytical critique is also presented together with some promising leads for future research.

The New Keynesian Paradigm of Monetary Policy

While Keynes was sceptical of the efficacy of monetary policy , the current mainstream macroeconomic consensus , "New" Keynesian macroeconomics , accords it primacy in the process of maintaining both price and output stability. This consensus depends on three relationships: demand is inversely dependent on the interest rate, inflation is positively related to the output gap and the central bank can control interest rates to achieve an optimum combination of price and output. This paper presents a theoretical critique of this consensus from an "old" Keynesian perspective since Keynes had raised fundamental objections to each of the three relationships .

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