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ABSTRACT:
This paper discusses some puzzles in the contemporary macroeconomic scene in India, from the perspective of public finance and economic development. These include a fiscal deficit higher than it was during the 1991 crisis, but without a large current account deficit or rise in inflation or interest rates, a rising inflow of external capital, accompanied by the RBI’s sterilizing these inflows and accumulating large reserves, even in the face of low inflation. We offer a critique of some previous analyses, and some models that are suggestive of how real and monetary factors might be integrated in providing a firmer grounding for the policy debates current in India.

SUGGESTED CITATION:
Nirvikar Singh and T. N. Srinivasan, "Foreign Capital, Inflation, Sterilization, Crowding-Out and Growth: Some Illustrative Models" (May 1, 2004). Department of Economics, UCSC. Paper 568.
http://repositories.cdlib.org/ucscecon/568