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The Sustainability of Indian Fiscal Policy: A Reassessment of the Empirical Evidence

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  • Marco Tronzano

Abstract

This paper reassesses the sustainability of fiscal policy in India from 1950 to 2010. Overall, the evidence broadly supports the hypothesis that the fiscal policy is "weakly" sustainable and documents a higher speed of adjustment to the intertemporal budget constraint than earlier papers do. Notwithstanding this improvement in the fiscal outlook, the author suggests that India should pursue a policy of fiscal consolidation in the years ahead, both because the ratio of public debt to the gross domestic product is still high compared to other emerging market countries and because "weak" fiscal solvency implies potential adverse consequences on the management of public debt.

Suggested Citation

  • Marco Tronzano, 2013. "The Sustainability of Indian Fiscal Policy: A Reassessment of the Empirical Evidence," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S1), pages 63-76, January.
    • Handle: RePEc:mes:emfitr:v:49:y:2013:i:s1:p:63-76
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    Citations

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    Cited by:

    1. Abdhut Deheri & Ajit Nag, 2023. "Assessing the Long-Run Sustainability of Public Debt and Fiscal Deficit in India," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 15(3), pages 313-329, September.
    2. Daniel Iulius Doaga, 2020. "Literature Survey Onsustainable Fiscal Policy Within The Countries Of Central And Eastern Europe," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 115-120, February.
    3. Piotr Krajewski & Michał Mackiewicz & Agata Szymańska, 2016. "Fiscal Sustainability in Central and Eastern European Countries - A Post-Crisis Assessment," Prague Economic Papers, Prague University of Economics and Business, vol. 2016(2), pages 175-188.
    4. Akram, Vaseem & Rath, Badri Narayan, 2020. "What do we know about fiscal sustainability across Indian states?," Economic Modelling, Elsevier, vol. 87(C), pages 307-321.
    5. P.S. Renjith & K.R. Shanmugam, 2018. "Sustainable Debt Policies of Indian State Governments," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 12(2), pages 224-243, May.

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