Fiscal Multipliers for India. (November 2015)

• Record Type: Journal Article
• Authors: Bose, Sukanya; Bhanumurthy, N.R.
• Is Part Of: Margin. Volume 9:Number 4(2015:Nov.)
• Page Start: 379
• Page End: 401
• Publication Date: 2015-11
• Subjects: Fiscal Multiplier -- Structural Modelling -- India; Economics -- Periodicals; Economics -- India -- Periodicals; Economics -- Asia -- Periodicals; Economic policy -- Periodicals; Economic development -- Periodicals; Economic development -- India -- Periodicals; Economic development -- Asia -- Periodicals; India -- Economic policy -- Periodicals; Asia -- Economic policy -- Periodicals; 338.9
• DOI: 10.1177/0973801015598585
• Languages: English
• ISSNs: 0973-8010

Abstract

This article attempts to present a framework for the estimation of fiscal multipliers for the Indian economy in the structural macroeconomic modelling tradition. Empirical estimates of short-run multipliers are obtained by giving shocks to a range of fiscal instruments—expenditures and taxes. As per our estimates, the values of the capital expenditure multiplier, transfer payments multiplier and other revenue expenditure multiplier are 2.45, 0.98 and 0.99, respectively, while the tax multipliers are around −1. Expenditure multipliers were also obtained in the presence of fiscal consolidation targets. These estimates again point to the strong multiplier effect of capital expenditure on output, and underscore the need to prioritise capital expenditure. JEL Classification: H50, C54