Public Expenditure and Emerging Fiscal Policy Scenario in India

38 Pages Posted: 25 Mar 2012

See all articles by Ranjit K. Pattnaik

Ranjit K. Pattnaik

Government of India - Reserve Bank of India

Dhriti Bose

affiliation not provided to SSRN

Indranil Bhattacharyya

affiliation not provided to SSRN

Jai Chander

Government of India - Reserve Bank of India

Date Written: March 31, 2005

Abstract

Pattnaik, Bose, Bhattacharyya and Chander analyse the role of public expenditure in India as a key fiscal policy instrument to achieve the goals of growth, equity and stability and, at the same time, to ensure the sustainability of public finances. The paper documents the development of fiscal policy and, in particular, of public expenditure in India since the beginning of the Eighties. After a period of mounting fiscal deficits (from 7.5 percent of GDP in 1980-81 to 9.4 in 1990-91), mainly driven by an increase in interest payments, in the early Nineties the government implemented a strategy of fiscal consolidation, which primarily focused on expenditure compression. In particular, the decline in capital outlays (from 3.0 percent in 1986-87 to 1.0 in 1996-97) enabled a reduction in fiscal deficit to 6.4 percent of GDP in 1996-97. In view of the evidence of a stable long-run relationship between public sector expenditure and national income in India, the Authors argue that such a trend needs to be reversed in the future and conclude that the bulk of fiscal adjustments has to rely on a greater mobilization of revenue receipts rather than on curtailing developmental expenditure.

Suggested Citation

Pattnaik, Ranjit K. and Bose, Dhriti and Bhattacharyya, Indranil and Chander, Jai, Public Expenditure and Emerging Fiscal Policy Scenario in India (March 31, 2005). Available at SSRN: https://ssrn.com/abstract=2028355 or http://dx.doi.org/10.2139/ssrn.2028355

Ranjit K. Pattnaik (Contact Author)

Government of India - Reserve Bank of India ( email )

Bakery Junction Service Road
Vazhuthacaud
Thiruvananthapuram, Kerala 695033
India

Dhriti Bose

affiliation not provided to SSRN ( email )

Indranil Bhattacharyya

affiliation not provided to SSRN

Jai Chander

Government of India - Reserve Bank of India ( email )

Mumbai
Mumbai, Kerala
India

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