The consequences of relying on incorrect stylised facts are more damaging than incorrect analysis or wrong empirical evidence

Rathin Roy: Misleading stylised facts

Business Standard

The government of India has implemented pay hikes drawing on the report of the Seventh Pay Commission, of which I was a member

Rathin Roy: A vicious circle

In this column, the author will focus on the longer term vision and strategy, focusing mainly on the macro-fiscal dimensions

Rathin Roy:15 questions and a plea

India is in a unique position to turn sustainability challenge into a growth opportunity since many of the investments we will be making for growth involve enhancing efficiency

Rathin Roy: Sustainability hurdles & opportunities

This government has stayed the course on unglamorous reforms and tax proposals

Rathin Roy: Focus on reforms, fiscal commitments

This is contingent on two things: low oil prices and the resilience of tax revenue to the lowering of nominal GDP growth

Rathin Roy: Disinflation and fiscal resilience

This a difficult ask, to engage with complex task of pursuing bipartisanship in public interest, however acrimonious and fundamental contemporary arguments about India's democratic polity

Rathin Roy: The possibility of bipartisanship

In any reasonable country, Dr Raghuram Rajan's reputation would be that of a rate-cutting governor. Cutting rates by 125 basis points within a year, against a background of persistently high inflationary expectations, and significant exchange rate management pressures indicates quite a faith in the curative properties of low interest rates. His irritation with "savants" is thus perfectly understandable.Having got the rate cuts demanded, attention must now focus on urgent unfinished business that the government of India and the investment community must execute.The introduction of the monetary policy agreement with concrete inflation targets, and the successful management of exchange rate pressures by the Reserve Bank of India (RBI) and the government means that two of the three objectives of short-term macro policy have been successfully executed. This has been combined with some aggressive selling of India's potential as an investment destination. There are several signs that economic

Rathin Roy: Unfinished business

Last year, I wrote in this newspaper ('An opportunity for fiscal reform', November 11) urging government to use the timely abolition of the Planning Commission to execute urgent reforms in our fiscal budgeting process by introducing medium-term fiscal budgeting. Nine months later, the 2016 Budget circular issued by the finance ministry asserts that Plan ceilings shall be communicated by the Budget Division of that ministry in the absence of a Planning Commission. The ministry's Plan finance divisions will deal with the central and state Plan allocations.This is worrying. The Planning Commission had two important responsibilities.First, in consultation with the finance ministry it fixed annual gross budgetary support (GBS) for central and state Plans. The GBS ceilings were decided after consultation with the states and signed off by the prime minister, a recognition that these consultations were not just technocratic, but a central political feature of our federal system. The Planning C

Rathin Roy: Finance ministry vs federalism

India's status quo position with respect to climate change negotiations appears to have three important "red lines". First, a uni-focal emphasis on adapation, with mitigation being addressed rather defensively and minimally; second, a static political alignment focusing on the BASIC grouping, and a reluctance to engage with fresh coalitions cutting across rich-poor dividing lines; and third, a focus on hectoring rich countries to provide climate finance to poor countries.I believe the status quo does not serve India well, and we need different thinking that better serves our interests.No sane person would argue against adaptation given the clear and present danger presented by global warming. However, I think this should not be the sole focus of India's negotiating interventions. The old-fashioned uni-focal emphasis on adaptation has meant that India's impressive track record on mitigation has been ignored.India has quietly risen to the challenge of being the first country in the world

Rathin Roy: In Paris, abandon the status quo

The recently concluded Addis Ababa financing for development "summit" was, as widely predicted, a damp squib. The United Nations (UN) communications machine, prone to hyperbole in inverse proportion to results for many years now, hailed the summit as "groundbreaking". This would be amusing were it not the case that the banality of the Addis outcome document reflects even more acutely the continued unwillingness of the developed world to take the issue of financing for development seriously.Financing for development is now akin to the problem of food security. The world has enough finance to comfortably provide the resources to ensure that all human beings on this planet are able to lead minimal decent lives, that no one goes hungry, is malnourished, illiterate or ill. Finance is also not the binding constraint to address climate change. The challenge is, first, to ensure that governments step in when markets fail to make finance available for national and global public goods; and secon

Rathin Roy: Failing to finance development

If the NDB is designed as a knowledge-based institution it will be more significant than the AIIB.

Rathin Roy: How BRICS bank can win

Since my return to India two years ago, I have fielded many questions from rating agencies and fund managers about forecasts of India's economic growth by the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB). Private forecasts from organisations like Goldman Sachs are also a regular feature of our policy landscape. The number of external agencies giving us their "take" on the future growth rate today far outnumbers domestic forecasters (the Union government, the Reserve Bank  of India plus the occasional think tank).Private agencies make money by claiming that their "take" on India is better than that of their competitors.  They must, therefore, produce their own forecast of the main indicator of India's economic health and claim that it is better than publicly available forecasts (otherwise, why would anyone pay them anything for their forecasts?).  But why are the international organisations in this business?Do they forecast growth better? I revi

Rathin Roy: The politics of growth projections

The Union government has no 'Buy India' policy, but has a 'Buy Air India' policy. The government, thus, behaves like a late Mughal dynast, with predictably similar results

Rathin Roy: Put India first, not Air India

In India's transition from the present continuous to the past perfect, the recent agreement between the Reserve Bank of India (RBI) and the Centre marks a significant step forward. The agreement acknowledges the need for a modern monetary policy framework (MPF). It specifies price stability (while keeping in mind growth) as its objective. The most important policy number specified in the agreement is the "operating target" - to secure six per cent inflation by January 2016 and four per cent in subsequent years, within a band of plus or minus two per cent.  It empowers the RBI to use monetary measures, chiefly the rate for repo transactions (the "policy rate") to achieve the target.The agreement is short and focused on the essentials, but the MPF is yet to be designed and operationalised. In doing so, important technical and institutional issues need to be addressed.First, there is something that puzzles within the agreement itself. It deems the RBI to have "failed" if inflation exceeds

Rathin Roy: How fiscal credibility matters

Enhanced tax devolution moderated to maintain resource allocation for central priorities

Rathin Roy: Numbers need to back the politics better

This year, 2015, will mark three important initiatives in multilateral economic diplomacy. First, the G20 will attempt to progress on International Monetary Fund (IMF) reform. Second, the role and institutional structure of the BRICS-financed New Development Bank (NDB) will be articulated. And finally, the financing framework for the post-2015 sustainable development goals (SDGs) will be agreed. But, as things stand, these three initiatives are being dealt with in silos. A vision that brings these three events together can kick-start a permanent change in the international political settlement that defines the architecture of international public finance. There is a historic opportunity for India to take leadership in this endeavour.On IMF reform, a deal brokered by the United States to increase the voting shares of emerging economies in 2010, (allowing them a greater share in governance) and the quotas of all developing countries (allowing them to borrow more) is stuck since 2010. The

Rathin Roy: 'Yes, we can' to economic diplomacy

The central bank will continue to calibrate its policy stance based not just on how it influences market expectations but also on how well the government delivers on its expectations

Rathin Roy: The RBI governor is not a betting man

The Planning commission is no more but the Plan Budget continues as a fiscal entity. This newspaper reported that Plan Budget proposals are to be prepared and forwarded by line ministries directly to the ministry of finance. As post-commission arrangements are yet to evolve, this is a necessary stopgap measure. But it marks the need to reflect on needed institutional reforms in the fiscal business process.The erstwhile Planning Commission had two important fiscal responsibilities. First, to allocate money to the states in order for them to finance their Plan expenditures. Second, to provide a five-year fiscal-resource framework for the central Plan. Much has been made of the first, which has meant centralisation and the use of imperial discretion by the Centre. Over the last decade, however, with the financial position of the states improving sharply, the imperial dimension has become more an irritant than a regrettable necessity for most states. It is still pertinent in the case of th

Rathin Roy