The Rise of the Indian Economy: Fiscal, Monetary and Other Policy Challenges

Posted: 1 Aug 2012

See all articles by Kaushik Basu

Kaushik Basu

Cornell University - Department of Economics; IZA Institute of Labor Economics; Brookings Institution

Date Written: August 1, 2012


This paper brings analytical economics to bear on some of the central economic policy challenges faced by contemporary India; monetary policy for controlling inflation, central bank exchange rate interventions and fiscal policy for promoting growth. Government, by giving orchestrated guarantees for infrastructure can ensure that multiple projects come up raising the probability of success of all these projects. India has responded to inflation by using fiscal contraction, liquidity tightening and monetary policy. By using a suitable strategic technique-called 'schedule intervention'-it is possible for the central bank to influence the exchange rate without affecting foreign currency reserves.

Keywords: Indian economic development, exchange rate intervention, fiscal policy, infrastructure, monetary policy

JEL Classification: E58, H54, O11

Suggested Citation

Basu, Kaushik, The Rise of the Indian Economy: Fiscal, Monetary and Other Policy Challenges (August 1, 2012). Rivista Italiana degli Economisti, Vol. 2, August 2012. Available at SSRN:

Kaushik Basu (Contact Author)

Cornell University - Department of Economics ( email )

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IZA Institute of Labor Economics

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Brookings Institution ( email )

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