India was one of the better performers after the global financial crisis, and has done well despite opening out in a period of great international volatility. This book asks if this was due to luck or to good management. How much did macroeconomic policy contribute and did it do as much as it could have, on a reform path that was not standard? Are there any lessons from the Indian experience for the rest of the world? Senior Indian policy economists, market participants, and researchers address these interesting and important questions.
There are those who think financial reform has gone too fast - relaxations in foreign borrowing norms exposed firms to external shocks. Volatile capital flows impacted markets, although more liberalization of risk-sharing equity compared to debt flows, was effective in reducing domestic risk. But there are also those who think reform was too slow - choking financial development: many markets and instruments that could improve domestic financial intermediation and reduce risk were held back. Analysis suggests policy was able to find the correct timing, pace and combination of reforms and of caution, but improvement is always possible. Luck and inherent strengths of the economy helped absorb both policy mistakes and external shocks.
This book was originally published as a special issue of Macroeconomics and Finance in Emerging Market Economies.
1. Introduction: Good Luck or Good Policy? Ashima Goyal 2. Macro-economic Management of the Indian Economy: Capital Flows, Interest Rates and Inflation Arvind Virmani 3. Capital Account Liberalization and Conduct of Monetary Policy: The Indian Experience Rakesh Mohan 4. Coming of Age - A Comparative Study of Emerging FX Markets Jamal Mecklai and Anis Shiekh 5. Indian Financial Institutions: Healthy Amid Global Crises Shyamala Gopinath 6. Learning from Crises Usha Thorat 7. The Coming Unwinding of Global Imbalances and What it Means for India Vivekanand Jayakumar 8. Volatility in Interest Rates: Its Impact and Management V. Shunmugam and Danish A. Hashim 9. Exchange Traded Currency Derivatives Markets in India: The Road Ahead Ranjan Chakravarty and D.G. Praveen 10. Spread, Volatility and Monetary Policy: Empirical Evidence from the Indian Overnight Money Market Saurabh Ghosh and Indranil Bhattacharya 11. Precautionary and Mercantilist Approaches to Demand for International Reserves: An Empirical Investigation in the Indian Context K.P. Prabheesh, D. Malathy and R. Madhumati 12. India’s Fiscal and Monetary Framework: Growth in an Opening Economy Ashima Goyal