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NCAER organised an event in collaboration with the International Monetary Fund (IMF) for the presentation of an Analytical Chapter titled, “Inflation and Disinflation: What Role for Fiscal Policy”, from the latest IMF Fiscal Monitor released in April 2023. Dr Marcos Poplawski-Ribeiro, Deputy Division Chief in the IMF’s Fiscal Policy and Surveillance Division of the Fiscal Affairs Department, made the presentation. He has previously held positions in the IMF’s Research, Fiscal Affairs, and African Departments, including as the IMF’s Resident Representative in Gabon during 2017–21.

The upsurge in inflation that began in 2021—the sharpest in more than three decades—has affected fiscal accounts, worsened poverty, and altered the distribution of households’ well-being, calling on policymakers to respond. The Analytical Chapter analyses these developments and explores how fiscal policy can do its part to curb inflation while supporting the vulnerable. The chapter finds that though surprise inflation may offer some breathing room for debt ratios, attempts to keep surprising bondholders have historically proven futile or harmful. Indexation practices vary considerably across countries. Hence, when reviewing them, policymakers need to balance protecting specific groups and avoiding making inflation more persistent. Redistribution effects of inflation, in turn, depend on three channels: consumption patterns, income, and wealth. The chapter also estimates the effect of fiscal policy on inflation, and shows that targeted fiscal policy can support monetary policy in lowering inflation while protecting those most affected by the cost-of-living crisis.

The discussion was chaired by Dr Ratna Sahay, Professor at NCAER. The discussants for the event were Dr Ashok Gulati, Chair Professor for Agriculture at Indian Council for Research on International Economic Relations, and Dr Poonam Gupta, Director General at NCAER and Member of the Economic Advisory Council to the Prime Minister.

Commenting on the presentation by Dr Ribeiro, Dr Poonam Gupta remarked, “The Analytical Chapter of the IMF’s Fiscal Monitor makes it clear that fiscal deficit and public debt, which increased significantly around the world during COVID, have remained elevated over the last two years. Monetary policy alone may not suffice to normalise inflation, and needs to be combined with fiscal consolidation, along with targeted support to the most vulnerable populations.” She also suggested that inflation is declining but will remain above the pre-pandemic level by 2024. “Public debt is an issue of concern in Advanced Economies but Low-Income Countries need debt relief. As for India, it has managed to keep inflation anchored and range-bound within an orbit of 2-6 per cent, and eventually it could settle at around 4 per cent, which is quite manageable”, she concluded.

Highlighting the criticality of controlling inflation, especially in the context of the ramifications of the pandemic for various economies, Dr Gulati averred, “The focus on inflation and measures to curb it in various countries in the Fiscal Monitor are very well-timed and the need of the hour, as in many nations, especially in Africa, Latin America, and South Asia, inflation is not just a number but literally a life-and-death issue. It is thus imperative to devise an amalgamated package comprising components of both fiscal and monetary policy to tame inflation… Trade policy is equally important in controlling inflation in the emerging markets.”

The National Council of Applied Economic Research (NCAER) hosted the 17^th 5-Institute Budget Seminar on Monday, February 6, 2023.

As part of a tradition that has been continuing since 2007, the seminar brought together the heads of five Institutes, at the NCAER campus, that is, NCAER, the Centre for Policy Research (CPR), the Indian Council for Research on International Economic Relations (ICRIER), the India Development Foundation (IDF), and the National Institute of Public Finance and Policy (NIPFP), to discuss and present a reform and development perspective on the 2023-24 Union Budget. The speakers at this 17^th edition of the Budget seminar included Poonam Gupta from NCAER, Deepak Mishra from ICRIER, Nishant Chadha from IDF, R. Kavita Rao from NIPFP, and Yamini Aiyar from CPR.

The discussion was chaired by V. Anantha Nageswaran, Chief Economic Adviser to the Government of India.

During her presentation, the Director General of NCAER, Poonam Gupta pointed out, “The 2023-24 Union Budget focused on domestic consumption as the main engine of growth, followed by public investment as the second, albeit smaller, growth engine. Significantly, it has not equally supported private investment or exports as accelerators of economic growth or generators of employment. But then, key policy announcements need not be confined to the annual budgetary exercise. Let’s hope that equally zealous announcements would follow through the year to support exports and private investments, both domestic and foreign direct investments. This would be crucial for ensuring that the Indian economy accelerates on all four engines, and not just on two.”

Flagging the issue of fiscal consolidation, R. Kavita Rao, Director, NIPFP, said, “Fiscal consolidation, as highlighted in the Budget, signifies an apt reflection of fiscal marksmanship.” She also said that the increase in capital expenditure announced in the Budget was a positive move but it remains to be seen if increase in capex really leads to an increase in employment, especially as most infrastructural development in recent years is being done through machines rather than human labour. She further opined, “Since the Government hopes to increase capex without increasing revenue expenditure, some re-allocation can be expected in capex. …There should also be room for freezing of revenue expenditure, if required.”

According to Deepak Mishra, Director and Chief Executive, ICRIER, “The 2023-24 Budget is likely to be best remembered for giving everyone something to feel good about, without resorting to reckless and populist policies. The Finance Minister did a great balancing act with respect to the development trinity: growth, distribution (inclusion), and stability. But the Budget did not announce any bold structural reform to tackle some of the binding constraints facing the economy, especially those that can help India to overcome its export stagnation.”

Focusing on the implications of Budget 2022-23 for the health and education sectors, and touching upon the themes of social security and jobs, Nishant Chadha, Fellow and Head, Projects, IDF, stated, “Productivity is multiplicative, and we need to create more productive jobs and to retain skilled people to build our economy. Overall, this Budget also makes it clear that education in the country needs a fix.”

Yamini Aiyar, President, CPR, highlighted the underlying political economy behind the Budget, reflected in limited State capacity for implementing the various schemes launched by the Government. She argued, “Since there is a limit to capital expenditure, we need better management, better incentivisation of the States, and a better federal structure to deal with the federal vacuum that inevitably arises when the Union Government prioritises schemes. She also suggested, “Since India’s fiscal structure is quite decentralised and de-concentrated, States often wait for implementation of Centrally-sponsored schemes before executing them at the State level. The ultimate trade-off is that we do not invest in human capital—an area that needs to be addressed urgently.”

Speaking on the occasion, the Chief Economic Adviser, Government of India, Dr V. Anantha Nageswaran noted, “The bulk of external market and other reforms have been undertaken in the last 20-30 years, and thereafter, we have been implementing incremental reforms, which is a focal point in the 2023-24 Budget.”

Dr Nageswaran also lauded the current Budget for “ensuring that the system has been cleaned up and the databases updated successfully, as a result of which no beneficiary will be left out. In fact, the allocations for various Centrally-sponsored projects may have gone down in the last few years but money going into the hands of the beneficiaries has doubled because the systems have been streamlined, leakages have been plugged, outputs are improving, and the process of identifying beneficiaries has been successfully and efficiently implemented.”

Dr Nageswaran also expressed his appreciation for the manner in which India had handled and implemented the vaccination programme post the outbreak of the COVID-19 pandemic. “Unlike many other countries, including the advanced economies, India implemented its vaccination programme with tremendous efficiency, successfully vaccinating over 1 billion people, and even managing to export vaccines to countries that could not access them otherwise.”

Finally, Dr Nageswaran touched upon the issue of the debt-to-GDP ratio, and averred that India was only one of three countries worldwide (Indonesia and Germany being the other two) where the debt-to-GDP ratio had been kept under check during the pandemic years, going up by only 3 per cent, from 81 per cent to 84 per cent—a significant achievement, not witnessed even in many advanced economies.

The National Council of Applied Economic Research (NCAER) and the Asian Infrastructure Investment Bank (AIIB) organised the regional launch of the AIIB Flagship Report titled, “Moonshots for the Emerging World: Building State Capacity and Mobilising the Private Sector toward Net Zero”, on 8 December 2022, at the Tamarind Hall, India Habitat Centre, New Delhi.

Dr Erik Berglöf, Chief Economist, AIIB, presented the key findings of the report. The main context of the report was that net zero transmission across the world is not happening fast enough, especially because of the persistently large fossil fuel footprints of the emerging markets and developing economies (EMDEs), and the slow adoption of green technology. He flagged the following net zero moonshots during his presentation:

• There is a need to build the capacity of the State-owned institutions to transform them into leaders.
• The private sector must be encouraged to participate in the transition to net zero but under the right atmosphere.
• The adoption of green technology is the need of the hour to fight the challenge of climate change in the backdrop of the Paris Agreement.
• The implementation of a meaningful carbon price should be accompanied by mission-driven coordination to ensure a smooth transition to net zero.

Dr Berglöf’s presentation was followed by a panel discussion, moderated by Mr Subhamoy Bhattacharjee, Senior Adjunct Fellow, RIS, and Consulting Editor at Business Standard. The panellists included Professor Purnamita Dasgupta, Chair in Environmental Economics and Head, Environmental and Resource Economics Unit, Institute of Economic Growth (IEG); Dr Laveesh Bhandari, Senior Fellow, Centre for Social and Economic Progress (CSEP); and Mr Rahul Bharti, Executive Director (Corporate Affairs), Maruti Suzuki.

The panel discussion was followed by the Keynote Address delivered by Mr Suman Bery, Vice-Chairman, NITI Aayog. This session was chaired by Dr Bornali Bhandari, Senior Fellow, NCAER.

In his keynote speech, Mr Bery highlighted the importance of complementing domestic efforts noted in the AIIB Report with the enhanced flow of external finance on reasonable terms, which is a central theme of India’s G20 Presidency.

Profiles of Panellists

Suman Bery is currently Vice Chairperson, NITI Aayog, in the rank and status of a Cabinet Minister. An experienced policy economist and research administrator, he has been a Senior Visiting Fellow at the Centre for Policy Research, New Delhi; a Global Fellow in the Asia Programme of the Woodrow Wilson International Centre for Scholars in Washington D.C.; and a non-resident fellow at Bruegel, an economic policy research institution in Brussels. From early 2012 till mid-2016, Mr Bery was Royal Dutch Shell’s global Chief Economist based in The Hague. Before his appointment at Shell, he served as Director-General of the National Council of Applied Economic Research (NCAER). He has earlier served as member of the Prime Minister’s Economic Advisory Council; of India’s Statistical Commission; and of the Reserve Bank of India’s Technical Advisory Committee on Monetary Policy.

Erik Berglöf is the inaugural Chief Economist at the Asian Infrastructure Investment Bank (AIIB). He sets the vision and strategy for the Economics Department and leads the planning, implementation, and supervision of its work plan in support of the Bank’s mandate. Prior to joining AIIB in September 2020, he was Director of the Institute of Global Affairs, London School of Economics, and Chief Economist of the European Bank for Reconstruction and Development from 2006 to 2015, where he helped create and co-led the Vienna Initiative, a European crisis response team credited with mitigating the impact of the 2008 Global Financial Crisis. He is an expert in transition economics and institutional transformation through private sector development. He holds a PhD in Financial Economics and an MA in Business and Economics, both from the Stockholm School of Economics.

Subhomoy Bhattacharjee is Consulting Editor at the Business Standard newspaper. He is also Senior Adjunct Fellow (energy sector) at RIS, a think tank which works closely with the Ministries of External Affairs, Finance, and Commerce. He is also Faculty at OP Jindal Global University, where he teaches Economics. He has worked in the Indian Information Service of the Government of India (through the civil services examination), and leading newspapers, including The Economic Times, The Indian Express, and The Financial Express.

Bornali Bhandari is a Senior Fellow at NCAER with a background in international economics and macroeconomics, specifically focusing on the impact of globalisation on development. Currently, she is engaged in a number of industry studies, covering automobiles, farm mechanisation, and digitisation. Her wider research interests include analysis of skilling from a 3-E perspective (education, employability and employment); e-Governance, infrastructure, particularly the roads and ICT sectors; G-20 issues like climate change financing and reserve currency; FDI and trade-related issues. She also oversees the production of the NCAER Quarterly Business Expectations Surveys. She has received her doctorate degree from University of Oregon, Eugene, USA.

Laveesh Bhandari is a Senior Fellow at Centre for Social and Economic Progress (CSEP) and Chief Economist at Indicus Foundation. He leads the climate change capability at CSEP and also plays an advisory role on the broad macro agenda, sub-national reform, and human capital. Laveesh has published widely on subjects related to sustainable livelihoods, industrial, economic and social reforms in India, economic geography, and financial inclusion. He has taught economics in Boston University and Indian Institute of Technology (IIT), Delhi. He has been the Managing Editor of Journal of Emerging Market Finance, and earlier worked at National Council of Applied Economic Research (NCAER), New Delhi. Currently, he is conducting research on issues of inclusion, India’s energy transition, and how it will impact the government as well as the economy. He received his PhD in Economics from Boston University, for which he was awarded the Best thesis in International Economics.

Rahul Bharti is Executive Director (Corporate Affairs), and Chief Investor Relations Officer at Maruti Suzuki. He also holds the offices of Chairman, International Relations and Trade Policy, Society of Indian Automobile Manufacturers (SIAM); Chief Engagement Officer, SIAM; Member, International Organization of Motor Vehicle Manufacturers (OICA or Organisation Internationale des Constructeurs d’Automobiles), the Global Auto Industry Association; and Member, Confederation of Indian Industry (CII) Haryana State Council.He is  a Gold Medallist from (now) Indian Institute of Technology (IIT), Roorkee, with more than 28 years of experience at Maruti Suzuki across vendor development, new product development, and corporate affairs.

Purnamita Dasgupta is Chair Professor and Head of the Environmental Economics Unit, Institute of Economic Growth, Delhi. Her research and teaching focus on the relationship between environment and economic development, in the context of climate change, health, and environmental sustainability.  She has been Visiting Professor at the University of Cambridge, UK, and Johns Hopkins University, USA. She is an author with the Intergovernmental Panel on Climate Change, International Panel on Social Progress and the Himalayan Mountain Assessment.  She has been associated with several Government committees related to setting standards, compensations, economic valuation, and accounting for the environment in India. Purnamita is currently a member of the Task Group for preparation of India’s Long-Term Low Greenhouse Gas Emissions Development Strategy. She has published widely in books and international journals, and serves on several international Editorial Boards and review committees.

Somya Mathur is an Associate Fellow at NCAER. She is working on CGE models. Previously, she has worked with Infinite Sum Modelling Inc., USA; Pune International Center on Climate Change Impacts; and the Ministry of Panchayati Raj. Her domain areas include trade and climate change. She has a Masters in Economics from the Gokhale Institute of Politics and Economics, Pune.

Anil K. Sharma is Secretary to the Governing Body and Operations Director at NCAER. He has held several positions at NCAER after joining in 1992, including as the Officiating Director General in May-June 2021. He has also been the NABARD Chair Professor at NCAER; Visiting Researcher at the International Trade Division, The World Bank, Washington D.C., USA; Consultant to the Organisation for Economic Co-operation and Development (OECD), Paris; Food and Agriculture Organisation (FAO), Rome; and, Asian Development Bank (ADB), Manila; and a Post-Doctoral Fellow at Research Institute for Agricultural Economics, Budapest, Hungary. His main areas of research include: The WTO Agreement on Agriculture, Economic and Policy Reforms in Agriculture, Price Policy and Price Stabilization Mechanisms, Rural Credit, Rural Infrastructure, and Rural Poverty. He advised the Ministry of Commerce and Industry on trade negotiations in agriculture under the WTO Agreement on Agriculture, and has been a member of several government and industry committees and task forces. He received his MSc and PhD in Agricultural Economics from the Himachal Pradesh Agricultural University.