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A theory of fiscal dominance in India

Viral Acharya, Deputy Governor of the RBI from 2017 to 2019, has brought out the speeches and monetary policy minutes that he had delivered while in service in a new book titled Quest for Restoring Financial Stability in India, with a freshly written preface: Fiscal Dominance - a Theory of Everything in India.

The essential theme is that fiscal dominance over monetary and financial sector policies leads to sub-optimal public policy outcomes. While, normally, fiscal dominance refers to relatively large fiscal deficit (especially revenue deficit)-to-GDP ratios impacting monetary policy, Acharya argues that fiscal dominance provides the basis for a “theory ...

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