Title: Estimation of fiscal multipliers for India

Authors: Bibhuti Ranjan Mishra; Bharadwaja Sastry Adiraju

Addresses: Department of Humanities and Social Sciences, Visvesvaraya National Institute of Technology, Nagpur, Maharashtra, 440010, India ' Ministry of Finance, Government of India, Udyog Bhawan, New Delhi, 110011, India

Abstract: The multiplier remains an effective tool to evaluate the effects of the changes in government expenditure. In this paper, we estimate five multipliers using the SVAR framework. We report impact multipliers in the range 0.23 to 1.85 and cumulative multipliers in the range 0.45 to 5.45. Our results are in line with empirical literature and have important implications for the Government of India's fiscal stance. We point out that since capital expenditure multipliers are greater than revenue expenditure multipliers, the government must rationalise revenue expenditure and spend more on building productive capital. Secondly, we recommend that capital budgets should be optimised towards components that provide the most productive effects. Finally, in light of the coronavirus-induced economic crisis, we recommend caution to ensure that greater revenue expenditure does not crowd out private investment and that a calibrated and coordinated monetary policy will be essential in tackling this issue.

Keywords: fiscal multipliers; fiscal policy; India.

DOI: 10.1504/IJEPEE.2025.145416

International Journal of Economic Policy in Emerging Economies, 2025 Vol.21 No.1, pp.64 - 90

Received: 20 Feb 2021
Accepted: 20 Sep 2021
Published online: 01 Apr 2025 *

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