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Macroeconomics of “NaMo” Budget 2014 in India

Chakraborty, Lekha S (2014): Macroeconomics of “NaMo” Budget 2014 in India. Published in: Yojana No. 2014 (2014)


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The present government has inherited an economy characterised by low growth, high inflation, high current account deficit and large fiscal imbalance at the Union level. What has struck me about Union budget 2014-15 is not the fiscal arithmetic, but the macroeconomic framework. One could sense a deal for fiscal-monetary policy co-ordination in the budget speech, especially with the announcement of Finance Minister for a “New Monetary framework”. The paper focuses on the macroeconomic framework of the budget rather than dealing with the fiscal arithmetic, in terms of policy announcements and budgetary allocations. The dynamics between North Block and Mint Road is always challenging, and so far India has witnessed a fiscal dominance, over monetary policy.The announcement by Finance Minister on “new monetary framework” for India needs to be co-read with the advancements in RBI seeking more ‘central bank independence’ to manage inflation and how it plays out in the macroeconomic context of India in light of the Expert Committee to Revise and Strengthen the Monetary Policy Framework. The underlying macroeconomic framework of the budget revealed two thematic priorities of the present government; (i) growth revival and (ii) macroeconomic stability. This sets the track. The Union budget was simultaneously ensuring a ‘continuity’ and ‘change’. The ‘continuity’ elements in the budget may be to ensure a bipartisan approach in tackling the issues of national interest, especially in case of fiscal consolidation path of earlier government. However the ‘changes’ suggested in the budget in terms of new monetary framework is disturbing.

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