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Vol. 3 No. 5 (Sep-Oct) (2022): Indian Public Policy Review
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In this issue of IPPR, Ashima Goyal's paper analyses issues important in adapting flexible inflation targeting (FIT) to emerging markets like India. The paper by Saon Ray, Piyali Majumder, Vasundhara Thakur, and Ayush Patel offers an assessment of the sectors that will be impacted most by India making a transition to a low carbon economy. Vivek Jadhav and Brinda Viswanathan investigate the extent to which 103 sub-state regions within 20 Indian states exhibit income convergence. In their paper, Shivakumar Jolad and Chaitanya Ravi call for a greater alignment of Western paternalistic frameworks with Indian socio-political context in understanding alcohol consumption and alcohol related government policies. Finally, Pranay Kotasthane writes a review article based on Dr. Govinda Rao's book Studies in Indian Public Finance.


Published: 2022-09-23
  • Flexible Inflation Targeting: Concepts and application in India

    Ashima Goyal

    The paper analyses issues important in adapting flexible inflation targeting (FIT) to emerging markets. This sets the context in which the evolution of FIT in India and its performance record are analysed. The dominance of supply shocks implies flexibility and fiscal-monetary coordination are necessary. Coordination can reduce the output sacrifice of disinflation, even as it aids fiscal consolidation. Communication has a major role in guiding expectations towards the inflation target. Strict implementation of inflation targeting imposed a large output sacrifice in the early years, but reversal to flexible implementation, in line with the original agreement, succeeded in keeping inflation largely within announced tolerance bands with a good growth recovery. Forecasting has improved and errors in both directions indicate the absence of bias. While there were supportive events in the initial years, such as the 2014 crash in oil prices and softening of food price inflation, the regime has also survived adverse periods of pandemic related supply-chain snarls and rising oil prices. A long period of disinflation and output sacrifice need not be necessary to anchor inflation expectations when there is complementary supply-side action. Since policy has to respond if inflation persistently exceeds the tolerance band, this also contributes to anchoring inflation expectations.

  • A sectoral view of conceptualising macroeconomics of a ‘just transition’ in India

    Saon Ray, Piyali Majumder, Vasundhara Thakur, Ayush Patel

    In light of India’s COP26 commitment of reaching net zero by 2070, it is important to understand how India could ensure a ‘just transition.’ Since the transition raises several questions regarding who will benefit from it and who will lose out, this paper offers an assessment of the sectors that will be impacted most by the transition. This includes coal, mining, power, formal manufacturing sectors, and MSMEs. Macroeconomic consequences of the transition in terms of employment intensity, energy intensity, the total value added, and export competitiveness of the above-mentioned sectors have been examined. Using data from the Annual Survey of Industries for 2017-18 and 2018-19 and key informant interviews, the paper presents a sectoral analysis of the transition in the Indian context. In terms of employment, the power and the coal sector will be affected the most. In terms of fuel use, manufacturing sectors that either use coal or purchase electricity (indirectly using coal) will also be impacted. The spatial dimension of the transition will be very important, since certain coal-producing districts will be affected the most.

  • Conditional convergence and Spatial convergence across 103 Sub-state Indian regions Using spatial econometrics for panel data

    Vivek Jadhav, Brinda Viswanathan

    Recent studies have devoted great emphasis to examining the phenomenon of income convergence across regions. The empirical efforts made in the context of India look at convergence among the states of India. Although there have been a few studies done on the district level, the sub-state regions that are prevalent within each state have been largely ignored in the Indian regional literature. The purpose of this research is to investigate the extent to which 103 sub-state regions within 20 Indian states converge. This research adopts a method that differs from the conventional convergence strategy by instead focusing on the spatial convergence aspect. It has been shown that not only does spatial convergence but also β-convergence: a growth process where poor regions grow faster than rich regions occur among India's 103 different regions. This study sheds insight on the two distinct forms of convergence, namely, β-convergence across all regions, and β-convergence among neighbouring regions. The finding of the existence of β-convergence and spatial convergence among neighbouring regions invites policy attention regarding the development of backward regions.

  • Six Essential Questions in Indian Public Finance Review article based on Studies in Indian Public Finance by M Govinda Rao

    Pranay Kotasthane

    In his latest book, Dr. M Govinda Rao, one of India’s foremost public finance experts, distills the insights of the field of public finance for students, scholars, practitioners, and lay readers alike. Studies in Indian Public Finance is a must-read for anyone interested in Indian public policy.

  • Caste, Conservative, Colonial, and State Paternalism in India's Alcohol Policies

    Shivakumar Jolad, Chaitanya Ravi

    Alcohol consumption in India is governed by social and moral codes and religious norms, stratified by caste and gender, and controlled by state policies. Indian alcohol policy today consists of measures ranging from high taxation to strict prohibition across different states. Our article examines whether the Western state paternalistic framework is adequate to explain the alcohol policies of India. We conduct a critical reading of texts on socio-cultural and political history of alcohol consumption, taxation, and regulation in India, and study their influence on contemporary alcohol policies of Indian states. A central theme presented in this paper is that India’s complex history, with social institutions of caste, religious conservatism, regional politics and colonialism, has created a unique complex of experiences related to alcohol, and argues for a greater alignment of Western paternalistic frameworks with Indian socio-political context. Broadly, we argue that state paternalism should be understood beyond the national and state politics of the present, and factor in the path-dependency of socio-cultural and political history of the state being examined.

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