The impact of tighter fiscal and monetary policy on inflation in India is now visible in recent price data. Inflation, measured both by the wholesale price index and by the consumer price index, has come down.
Ila Patnaik is no longer with the Carnegie Endowment for International Peace.
Ila Patnaik is a nonresident senior associate in Carnegie’s South Asia Program. She is also a professor at the National Institute of Public Finance and Policy (NIPFP) in New Delhi. Her main area of interest is the study of India as an opening economy. Her research includes issues related to capital flows, business cycles, the financial sector, and the study of Indian firms as India opens up its capital account. She writes regular columns in the Indian Express and the Financial Express.
Before joining NIPFP in 2006, Patnaik served as economics editor of the Indian Express (2004–2006), as senior economist at the National Council of Applied Economic Research (NCAER), New Delhi (1996–2002), and as a senior fellow at the Indian Council for Research in International Economic Relations (ICRIER) (2002–2004). Patnaik was a visiting scholar at the IMF in 2003, 2010, and 2013.
Patnaik has served on a number of advisory committees on financial policy and regulation, including the Ministry of Finance Working Group on Foreign Investment (2009–2010), Ministry of Finance Internal Working Group on Internal Debt Management (2008), and Reserve Bank of India Working Group on Economic Indicators (2001–2002). She co-led the research team for the Ministry of Finance Financial Sector Legislative Reforms Commission (2011–2013).
The impact of tighter fiscal and monetary policy on inflation in India is now visible in recent price data. Inflation, measured both by the wholesale price index and by the consumer price index, has come down.
In April, Indians will head to the polls to elect their next government. The incoming government will assume office saddled with thorny economic issues that range from large deficits and high inflation to sputtering economic growth.
In India, what merits attention is the sequence and timing of capital account liberalization, and the establishment of institutional capability for fiscal, financial, and monetary policy.
It is clear to students of monetary economics that an inflation-targeting framework is the way forward for India, which is opening up its capital account and moving towards a flexible exchange rate regime.
It will take more than a new government to fix India’s struggling economy. The country needs broad reforms and institutional change to address fundamental flaws in its economic system.
The RBI has asked the finance minister to amend the Reserve Bank of India Act, to allow it to supervise non-bank subsidiaries of banks.
India’s financial system has long been inadequate. The new Indian Financial Code promises to change business as usual.
India should step up its use of biometric identification to streamline its welfare system.
The BJP is reportedly evaluating various reform proposals to include in its manifesto. It is important to evaluate these on the basis of both economic theory and international experience.
India needs a new approach to financial innovation and it is time the Reserve Bank of India realized that more of its mandate-driven approach is not the solution.