A Macro-Fiscal Modeling Framework for Forecasting and Policy ...

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(i) Output Growth The output growth performance is assessed using the annual growth of real GDP at factor cost from 1951-52 to 2008-09. Indirect taxes net of subsidies are fiscal instruments that take GDP at factor cost to GDP at market prices. Chart 1.1 shows a long term cyclical path followed by the rate of growth of real GDP at factor cost and the growth rate of real GDP at market prices closely follows it with a mild variation in almost all the years. Although the GDP at factor cost registered the Hindu rate of growth of about 3.5 percent per annum during the first three decades of the post Independence period, it grew at a higher rate of about 5.7 percent during the eighties and nineties. There was a slowdown in the GDP growth in the early years of the current decade. During 2000-01 to 2002-03, the GDP grew approximately at an average rate of 4 percent. After that it showed an impressive growth rate of about 8.5 percent per annum. However, the quick estimates for 2008-09 indicate only about 7 percent growth of GDP. Chart 1.2 shows the time profile of the sectoral growth. Agriculture, by far the largest sector till 1970 grew at an average rate of 2.69 percent during the seventies, eighties and nineties while the industry and the services sectors grew at a much higher rate of about 5.6 and 6.3 percent respectively over the same period. Chart 1.1: Growth Rates of GDP (real) at Factor Cost and Real GDP (real) at Market Prices 12 10 8 6 4 2 0 -2 -4 -6 -8 GDPfc GDPmp 13
During 2000-01 to 2002-03, agriculture registered a negative growth of -0.57 percent while the industry and the services grew at a higher rate of 5 and 6.5 percent respectively. After that agriculture recovers, growing at an average rate of 4.8 percent. At the same time, the industry and the services sectors grow at an impressive average rate of 7.8 and 9.9 percent. It is noted that the agriculture growth is relatively highly volatile as compared to other sectors. Chart 1.2: Sectoral Growth Rates (Real) (ii) Private Investment and Consumption In a capital constrained economy like India, growth depends among other factors on the rate of investment, particularly rate of private (corporate + household) investment which in turn depends on the saving or consumption rate. Chart 1.3 shows the time profile of private investment and consumption relative to GDP since 1950-51. The former indicates a slowly increasing trend while the latter a faster declining trend. Till 1987-88, the private consumption was above 80 percent of GDP. After that it started declining at a fast pace and reached about 60 percent level in 2007-08. On the other hand the private investment-GDP ratio increased from 7.64 percent in 1950-51 to 15.7 percent in 1990-91. Currently, it is about 30 percent of GDP. 14
Page 1 and 2: MONOGRAPH 22/2012 A Macro-Fiscal Mo
Page 3 and 4: MONOGRAPH 22/2012 May 2012 Rs.200/-
Page 5 and 6: Overview and Rationale EXECUTIVE SU
Page 7 and 8: centre‟s and states‟ (taken col
Page 9 and 10: to nearly fully replicate the growt
Page 11 and 12: sustained stimulus to the economy c
Page 13 and 14: CONTENTS Preface Acknowledgements E
Page 15 and 16: 5.4 Selected Tax Revenues: Summary
Page 18 and 19: Chapter 1 1.1 Background INTRODUCTI
Page 20 and 21: elativities or shares of provinces
Page 22 and 23: (VECM) as well as structural cointe
Page 24 and 25: (a) First Phase: Models up to Sixti
Page 26 and 27: short-term variations around long-t
Page 28 and 29: investment) have separate equations
Page 32 and 33: Chart 1.3: Private Consumption and
Page 34 and 35: Chart 1.6: Interest Rates: Long-ter
Page 36 and 37: On the other hand, during 1950-51 t
Page 38 and 39: Chart 1.11: Revenue Deficits as % o
Page 40: 1.6 Summary In this Chapter we have
Page 43 and 44: (1987). Many economists thought tha
Page 45 and 46: equation, the trend and structural
Page 47 and 48: Papell (1997), and Morimune and Nak
Page 49 and 50: F T ( 1 , 2 , ...., k ; q) = (1/T)
Page 51 and 52: 7. Hatekar-Dongre (2005) argue that
Page 53 and 54: we need to test whether the time se
Page 55 and 56: used to select the optimal number o
Page 57 and 58: 83, and 1997-98. KRS has three brea
Page 59 and 60: IDR has four break dates in the yea
Page 61 and 62: Structural Variables Names Break Da
Page 63 and 64: The real and external sectors are l
Page 65 and 66: Government investment expenditure i
Page 67 and 68: compensation of employees to the re
Page 69 and 70: 36. Union Excise Duties: LUDR = f {
Page 71 and 72: CBKE = CBFDO+CBNDKR-CBRD 64. Combin
Page 73 and 74: (b) Exogenous Variables Exogenous v
Page 75 and 76: interest payments; it arises mainly
Page 77 and 78: the structural break dummy D81, all
Page 79 and 80: eak dummies (D64, D88 and D99) for
Page 81 and 82:
Table 4.5: Industrial Output Depend
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Table 4.7: Investment in Agricultur
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4.5 External Sector Demand for Impo
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Table 4.12: Demand for Broad Money
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Table 4.14: Long Term Interest Rate
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Table 4.16: Implicit Price Deflator
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Table 4.18 Unit Value of Exports De
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Table 4.20: Income Tax Revenue Depe
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Table 4.22: Union Excise Duties Dep
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Table 4.24: Central Effective Inter
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Table 4.26: State Other Indirect Ta
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Table 4.28: Testing for First Order
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larger the error, the larger will b
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c. Limitations of Comparisons betwe
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The terms thus provide information
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5.3 Investment Variables Table 5.1
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all these variables accurately. The
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Chapter 6 FORECASTS: BASE AND REFOR
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a. Macro Indicators The average gro
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Year Income Tax (ITR) Table 6.4: Ce
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Year Revenue Expenditures (CRE) Tab
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Year Table 6.8: State Finances: Rev
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throughout the period 2010-11 to 20
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Year Table 6.12: Combined Finances:
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On the state finances, there will o
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Year Table 6.16: Combined Finances:
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Year Table 6.17: Forecasts of Macro
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Year Table 6.19: State Finances: De
Page 138:
provided for in order to stimulate
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In order to identify whether the In
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with a balance of payment identity.
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model-forecasts are taken as condit
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Table 7.3: Forecasts of Major Fisca
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In Scenario 2, the following are th
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Commission. This is because of the
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Balakrishnan, P and K. Pushpagandan
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Dickey, D.A. and W.A. Fuller (1979)
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Krishnamurty, K. (1984), “Macroec
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Pandit, V. and B.B. Bhattacharya (1
Page 161 and 162:
Yule, G.U. (1927), “On a Method o
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No. Name Description Unit Source (B
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No. Name Description Unit Source (B
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Exogenous Variables Appendix A3.2 L
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Appendix A4.1 TESTING FOR SERIAL CO
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11 Dependent Variable: RSLEXPR Samp
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21 Dependent Variable: RSLSSR Sampl
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1. Variables YR and YN Appendix A5.
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3. Variables RSN and RLN Years RSN
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5. Variables ITR and CPTR Years ITR
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7. Variables CRR and CRE Years CRR
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9. Variables SRR and SRE Years SRR
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11. Variable YSR Years YSR Forecast
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for 3 years is based on projection
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12. SS: Share of States in Centre
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Appendix A6.2 FORECAST FOR SELECTED
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Years IDR IG CBOBB CBFDO IIR IMPR 2
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Years SKE SOITR SRD SRE SRR SSR 200
Page 197:
MSE Monographs * Monograph 9/2010 F
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