Research Topics

Publications on India

There are 9 publications for India.
  • The Long-run Determinants of Indian Government Bond Yields


    Working Paper No. 881 | January 2017

    This paper investigates the long-term determinants of Indian government bonds’ (IGB) nominal yields. It examines whether John Maynard Keynes’s supposition that short-term interest rates are the key driver of long-term government bond yields holds over the long-run horizon, after controlling for various key economic factors such as inflationary pressure and measures of economic activity. It also appraises whether the government finance variable—the ratio of government debt to nominal income—has an adverse effect on government bond yields over a long-run horizon. The models estimated here show that in India, short-term interest rates are the key driver of long-term government bond yields over the long run. However, the ratio of government debt and nominal income does not have any discernible adverse effect on yields over a long-run horizon. These findings will help policymakers in India (and elsewhere) to use information on the current trend in short-term interest rates, the federal fiscal balance, and other key macro variables to form their long-term outlook on IGB yields, and to understand the implications of the government’s fiscal stance on the government bond market.

    Download:
    Associated Programs:
    Author(s):
    Tanweer Akram Anupam Das

  • Does Keynesian Theory Explain Indian Government Bond Yields?


    Working Paper No. 834 | March 2015

    John Maynard Keynes held that the central bank’s actions determine long-term interest rates through short-term interest rates and various monetary policy measures. His conjectures about the determinants of long-term interest rates were made in the context of advanced capitalist economies, and were based on his views on ontological uncertainty and the formation of investors’ expectations. Are these conjectures valid in emerging markets, such as India? This paper empirically investigates the determinants of changes in Indian government bonds’ nominal yields. Changes in short-term interest rates, after controlling for other crucial variables such as changes in the rates of inflation and economic activity, take a lead role in driving changes in the nominal yields of Indian government bonds. This vindicates Keynes’s theories, and suggests that his views on long-term interest rates are also applicable to emerging markets. Higher fiscal deficits do not appear to raise government bond yields in India. It is further argued that Keynes’s conjectures about investors’ outlooks, views, and expectations are fairly robust in a world of ontological uncertainty.

    Download:
    Associated Programs:
    Author(s):
    Tanweer Akram Anupam Das

  • Minsky, Monetary Policy, and Mint Street


    Working Paper No. 820 | November 2014
    Challenges for the Art of Monetary Policymaking in Emerging Economies

    This paper examines the emerging challenges to the art of monetary policymaking using the case study of the Reserve Bank of India (RBI) in light of developments in the Indian economy during the last decade (2003–04 to 2013–14). The paper uses Hyman P. Minsky’s financial instability hypothesis as the conceptual framework for evaluating the endogenous nature of financial instability and its potential impact on monetary policymaking, and addresses the need to pursue regulatory policy as a tool that is complementary to monetary policy in light of the agenda of reforms put forward by Minsky. It further reviews the extensions to the Minskyan hypothesis in the areas of setting fiscal policy, managing cross-border capital flows, and developing financial institutional infrastructure. The lessons learned from the interplay of policy choices in these areas and their impact on monetary policymaking at the RBI are presented.

    Download:
    Associated Program:
    Author(s):
    Srinivas Yanamandra

  • Gender-responsive Budgeting as Fiscal Innovation


    Working Paper No. 797 | April 2014
    Evidence from India on “Processes”

    Gender-responsive budgeting (GRB) is a fiscal innovation. Innovation, for the purposes of this paper, is defined as a way of transforming a new concept into tangible processes, resources, and institutional mechanisms in which a benefit meets identified problems. GRB is a fiscal innovation in that it translates gender commitments into fiscal commitments by applying a “gender lens” to the identified processes, resources, and institutional mechanisms, and arrives at a desirable benefit incidence. The theoretical treatment of gender budgeting as a fiscal innovation is not incorporated, as the focus of this paper is broadly on the processes involved. GRB as an innovation has four specific components: knowledge processes and networking, institutional mechanisms, learning processes and building capacities, and public accountability and benefit incidence. The paper analyzes these four components of GRB in the context of India. The National Institute of Public Finance and Policy has been the pioneer of gender budgeting in India, and also played a significant role in institutionalizing gender budgeting within the Ministry of Finance, Government of India, in 2005. The Expert Committee Group on “Classification of Budgetary Transactions” makes recommendations on gender budgeting—Ashok Lahiri Committee recommendations—that will become part of the institutionalization process, integrating the analytical matrices of fiscal data through a gender lens and also the institutional innovations for GRB. Revisiting the 2004 Lahiri recommendations and revamping the process of GRB in India is inevitable, at both ex ante and ex post levels.

  • Exports, Capabilities, and Industrial Policy in India


    Working Paper No. 638 | November 2010

    An extensive literature argues that India’s manufacturing sector has underperformed, and that the country has failed to industrialize; in particular, it has failed to take advantage of its labor-abundant comparative advantage. India’s manufacturing sector is smaller as a share of GDP than that of East Asian countries, even after controlling for GDP per capita. Hence, its contribution to overall GDP growth is modest. Without greater participation of the secondary sector, the argument goes, the country will not be able to develop and become a modern economy. Standard arguments blame the “license-permit raj,” the small-scale industrial policy, and the supposedly stringent laws. All these were part of the industrial policy regime instituted after independence, which favored the heavy-machinery subsector. We show that this policy bias negatively affected the development of India’s labor-intensive sector, as the country should export with comparative advantage a larger number of these products, given its income per capita. However, India’s manufacturing sector is relatively well diversified and sophisticated, given also the country’s income per capita. In particular, India’s inroads into machinery, metals, chemicals, and other capital- and skilled labor–intensive products has allowed the country to accumulate a large number of capabilities. This positions India well to expand its exports of other sophisticated products.

    Download:
    Associated Program:
    Author(s):
    Jesus Felipe Utsav Kumar Arnelyn Abdon

  • Technical Change in India’s Organized Manufacturing Sector


    Working Paper No. 626 | October 2010

    We use the real wage–profit rate schedule to examine the direction of technical change in India’s organized manufacturing sector during 1980–2007. We find that technical change was Marx biased (i.e., declining capital productivity with increasing labor productivity) through the 1980s and 1990s; and Hicks neutral (increasing both capital and labor productivity) post-2000. The historical experience suggests that Hicks-neutral technical change may only be a passing phase before we see a return to the long-term trend of Marx-biased technical change. We also find that the real profit rate has increased from about 30 percent to a very high 45 percent, that the real wage rate increased marginally, and that the share of capital in value added doubled. Overall, technical change in India’s organized manufacturing sector during 1980–2007 favored capital.

     

    Download:
    Associated Program:
    Author(s):
    Jesus Felipe Utsav Kumar

  • A Reassessment of the Use of Unit Labor Costs as a Tool for Competitiveness and Policy Analyses in India


    Working Paper No. 624 | September 2010

    We reinterpret unit labor costs (ULC) as the product of the labor share in value added, times a price adjustment factor. This allows us to discuss the functional distribution of income. We use data from India’s organized manufacturing sector and show that while India’s ULC displays a clear upward trend since 1980 (with a decline since the early 2000s), this is exclusively the result of the increase in the price deflator used to calculate the ULC. The labor share of India’s organized manufacturing sector has been on a downward trend, from 60 percent in 1980 to 26 percent in 2007. This means that the sector’s capital share increased from 40 to 74 percent over the same period. We also find that real wages have increased minimally during the period analyzed—well below labor productivity—while the real profit rate and unit capital costs have increased substantially. We conclude that if India’s organized manufacturing sector has lost any competitiveness, it is the result of the increase in unit capital costs. Our analysis questions policy recommendations that advocate wage moderation, which result from simply looking at the evolution of the ULC, and that blame the loss of competitiveness on high or increasing wages.

  • Caste and Wealth Inequality in India


    Working Paper No. 566 | May 2009

    In this paper, we conduct the novel exercise of analyzing the relationship between overall wealth inequality and caste divisions in India using nationally representative surveys on household wealth conducted during 1991–92 and 2002–03. According to our findings, the groups in India that are generally considered disadvantaged (known as Scheduled Castes or Scheduled Tribes) have, as one would expect, substantially lower wealth than the “forward” caste groups, while the Other Backward Classes and non-Hindus occupy positions in the middle. Using the ANOGI decomposition technique, we estimate that between-caste inequality accounted for about 13 percent of overall wealth inequality in 2002–03, in part due to the considerable heterogeneity within the broadly defined caste groups. The stratification parameters indicate that the forward caste Hindus overlap little with the other caste groups, while the latter have significantly higher degrees of overlap with one another and with the overall population. Using this method, we are also able to comment on the emergence and strengthening of a “creamy layer,” or relatively well-off group, among the disadvantaged castes, especially the Scheduled Tribes.

    Download:
    Associated Program:
    Author(s):
    Ajit Zacharias Vamsi Vakulabharanam

Quick Search

Search in: