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The Challenge of Fiscal Adjustment in a Democracy: The Case of India
Author:
Mr. Ricardo Hausmann
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and
Miss Catriona Purfield
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Series:
IMF Working Papers
Volume/Issue:
Volume 2004: Issue 168
Language:
English
Publication Date:
01 Sep 2004
DOI:
https://doi.org/10.5089/9781451858297.001
ISBN:
9781451858297
ISSN:
1018-5941
Pages:
30
Keywords:
WP; government debt; central government; interest rate; Fiscal responsibility legislation; federal relations; fiscal deficits; debt; monitoring government fund; government experience; State election; debt relief; political system; government approval; channels half; government fund; electoral system; debt rise; government channels half; levels of government; Budget planning and preparation; Government debt management; Eastern Europe; Western Europe; Sub-Saharan Africa; Africa
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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India's fiscal problem has deep roots in its federal fiscal system, where multiple players find it difficult to coordinate adjustment. The size and closed nature of the Indian economy, aided by its deep domestic capital market and large captive pool of domestic savings, has disguised the cost of fiscal laxity and complicated the building of a consensus on reform. The new fiscal responsibility act establishes a new rules-based system to overcome this coordination failure. To strengthen the framework, we recommend an autonomous scorekeeper and the extension of similar rules to the state governments as part of a comprehensive reform of the federal system.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund