A Macro Fiscal Adjustment Model for Tamil Nadu State in India

16 Pages Posted: 13 Jul 2000

See all articles by J V M Sarma

J V M Sarma

Hyderabad University, Department of Economics

Gautam Naresh

National Institute of Public Finance and Policy

Abstract

Although fiscal imbalance and its adverse effects on macro economic equilibrium in India have been receiving wide attention, the issue at States' level has not so far been adequately analyzed. In many respects, fiscal situation in States is more critical than that at the Centre as States have the Constitutional responsibility for providing basic social and economic services, yet, do not have independent power to borrow from the market or the central bank. Given these constraints, the burden has tended to fall on capital and maintenance expenditures with adverse implications. If the same trends continue, the fiscal deficit is likely to assume disquieting proportions. Since most of the issues are common to States, it is possible to have a common reform package. In this paper, an attempt has been made to suggest such a common package. A recursive model with the twin objectives of forecasting and policy simulations has been developed, and the impact of the suggested reform package has been estimated for the State of Tamil Nadu as an example.

JEL Classification: C51,C52,C57,E17,E61,E62,E65,H60,H61,H62,H63

Suggested Citation

Sarma, Jana V.M. and Naresh, Gautam, A Macro Fiscal Adjustment Model for Tamil Nadu State in India. Available at SSRN: https://ssrn.com/abstract=231603 or http://dx.doi.org/10.2139/ssrn.231603

Jana V.M. Sarma (Contact Author)

Hyderabad University, Department of Economics ( email )

Gachibowli
Hyderabad, Telangana 500046
India
+91 9866224789 (Phone)

Gautam Naresh

National Institute of Public Finance and Policy ( email )

18/2, Satsang Vihar Marg
New Delhi, 110067
India

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