Abstract:  COVID-19 pandemic, a health crisis, has rattled the global economy. In this situation, the Indian government has announced a fiscal package worth INR 1.7 trillion, but there are arguments for even more spending. Using data from a cross-section of countries, we first estimate the relationship between fiscal spending and COVID-19 spread, economic stringency, and macroeconomic factors. Our estimates suggest that India can spend 2.2-4.8 percent of its Gross Domestic Product (GDP), based on the global benchmark. Accounting for tax and output shortfall due to the pandemic, we project the fiscal deficit of the central government can be as high as 8.4 percent, in the most pessimistic case, while 3.7 percent in a relatively optimistic case. We finally argue that subsidy rationalization is the way forward to fund the much-needed health expenditures and transfers while maintaining the fiscal discipline.

Abstract: In this study, we document the important factors that affect automobile sales growth in India. We find that fuel price movements matter for aggregate growth in automobile sales while credit appears to have no significant impact. The impact of crude prices is also reflected in the market valuation of automobile firms. In addition, we use disaggregated data on vehicle registrations and provide evidence that exogenous policy changes such as vehicle insurance and the maturing of the ride-hailing services segment have generated short-term fluctuations in automobile sales. Overall, we find that the recent slowdown in automobile sales can broadly be explained by high fuel prices and exogenous policy changes.

Media Coverage: Bloomberg, Business Standard

Abstract: The crude price shock in the 1970s sent many economies tumbling down for almost a decade. Four decades later, this shock can still jeopardise those economies which are primarily dependent on crude imports. This study looks at the quantitative impact of crude price shock on India’s three major macro-stability indicators: current account deficit (CAD), inflation and fiscal deficit. We find that if a crude price shock hits the Indian economy, the CAD to GDP ratio will rise sharply irrespective of a higher GDP growth; and a 10 USD/barrel increase in oil price will raise the inflation by roughly 49 basis points (bps) or increase the fiscal deficit by 43 bps (as a percentage of GDP) if the government decides to absorb the entire oil price shock rather than passing it to the end users.

Media Coverage: Business Standard, The Wire

Abstract: The implementation and refund delays under the new tax regime of Goods and Services Tax (GST) seem to have led to working capital constraints for firms, which in turn might have hurt their exports in October 2017. We provide evidence supporting this hypothesis using sectoral data on exports and find sectors that have high working capital requirements took the maximum hit during this period. However, various initiatives by the Government of India since then appear to have significantly alleviated exporters’ concerns which got reflected in the exports growth pick up in November and December 2017.

Media Coverage: Indian Express, Economic Times