| Summary/Abstract |
The article is an attempt to assess India’s fiscal and external sector vulnerability in the context of the deterioration in major macroeconomic indicators in recent years. The balance sheet approach (BSA) developed mainly by the International Monetary Fund (IMF) is applied to analyse episodes of major fiscal, financial and external payment crises in developing countries between the late 1990s to early 2000. The present work assesses the vulnerability in India’s fiscal and external sectors by descriptive and comparative analyses of relevant indicators and developing a composite vulnerability index (CVI) consisting of the indicators under study. Fiscal or external sector vulnerability can also be assessed by how easily or smoothly a government or a nation can finance its budgetary deficit or rollover of debt or the external sector funding needs. The method of financing and management of debt-related liabilities become important in this context. This may get reflected in currency composition, maturity pattern and ownership pattern of liabilities. The CVI score and favourable currency composition, maturity pattern and ownership pattern of liabilities largely helped India reduce both fiscal and external sector liabilities significantly in recent years.
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