تثبیت مالی با رشد بالا: یک مدل شبیه سازی سیاست برای هند

In this paper a fiscal consolidation program for India has been presented based on a policy simulation model that enables us to examine the macroeconomic implications of alternative fiscal strategies, given certain assumptions about other macro policy choices and relevant exogenous factors. The model is then used to estimate the outcomes resulting from a possible strategy of fiscal consolidation in the base case. The exercise shows that it is possible to have fiscal consolidation while at the same time maintaining high GDP growth of around 8% or so. The strategy is to gradually bring down the revenue deficit to zero by 2014–15, while allowing a combined fiscal deficit for centre plus states of about 6% of GDP. This provides the space for substantial government capital expenditure, which translates to a significant public investment program. This in turn leads to high overall investment directly and indirectly, via the crowding in effect on private investment, which drives the high GDP growth. The exercise has also tested the robustness of this strategy under two alternative scenarios of higher and lower advanced country growth compared to the base case.

The Thirteenth Finance Commission (henceforth The Commission) was mandated to recommend a fiscal consolidation program for implementation by central and state governments. This task was made particularly challenging by the global financial crisis that followed the collapse of Lehman Brothers on 11th September 2008. India did not suffer a deep recession like most developed countries. However, the recession in developed countries resulted in a decline in demand for Indian exports to those countries. This effect was compounded by considerable volatility in financial markets, triggered by the rapid withdrawal of portfolio investments by foreign institutional investors (FIIs) and a sharp squeeze of liquidity, resulting in severe demand deficiency in several sectors of the real economy. The combined effect of the external crisis transmitted through these two main channels resulted in a significant dip in India's growth from around 9% in the recent past to only 6.7% in FY2008-2009. A strong fiscal stimulus became necessary in the second half of FY 2008–2009 and again in FY2009–2010 to help revive growth. The positive impact of this stimulus became evident especially during the last two quarters of FY 2009–2010. At the same time the stimulus entailed a further deterioration of the fiscal condition, which was challenging even before the global crisis got underway. One of the key tasks before the Commission was to propose a program of revenue and public expenditure for the federal and state governments that takes the economy back to a sustainable fiscal path along with high growth. The NIPFP policy simulation model (henceforth NIPFP model) was used to assist the Commission in addressing this question. This paper reports on that exercise.

In this paper a fiscal consolidation program has been presented based on a policy simulation model. The exercise shows that it is possible to have such consolidation while at the same time maintaining high growth rates of around 8% or more. The strategy is to gradually bring down the revenue deficit to zero by 2014–15, while allowing a combined fiscal deficit for centre plus states of about 6% of GDP. This provides the space for substantial government capital expenditure, which translates to a significant public investment program. This leads in turn to high overall investment directly and indirectly, via the net ‘crowding in’ effect on private investment. High GDP growth follows through various stages of the Keynes-Kahn multiplier. On the fiscal side, the fiscal deficit ratio declines despite rising public expenditure because of the combined effect of the strong income multiplier for government capital expenditure (Das, 2007) and an estimated revenue buoyancy significantly greater than one. The exercise has also tested the robustness of this strategy under alternative scenarios of higher and lower advanced country growth. Though this leads to some variation in the rates of growth, fiscal deficit, public debt-GDP ratio, etc. the basic qualitative results of the fiscal consolidation strategy are sustained. It is also noted that the current account deficit varies between 2% to 4% of GDP in the alternative scenarios. Elimination of the revenue deficit by 2014–15 will entail determined action both on the revenue side as well as in government expenditure. On the revenue side, maintaining high tax buoyancy following the envisaged reform in direct and indirect taxes will be key. Pending such reforms, substantial mobilization of non-tax revenues and non-debt capital receipts will be important in the short run. On the expenditure side the Government needs to focus on measures to contain revenue expenditure growth and create the space for robust capital expenditure. The risk is that if these steps on the revenue or expenditure side turn out to be politically or administratively infeasible, then the proposed fiscal consolidation program could fail.