Economic Times 2007
A triumph of Reforms
Rise of Billionaires: Threat to Growth?
Inequality and Reforms
Political Economy of Reforms in India
Mumbai: Self-inflicted Wounds
Agriculture, The Final Frontier?
A Letter to Chief Minister Mayawati
Rough Road Ahead for Free Trade
Economic Times 2006
Is India Flying? Is the current growth in
India we observe represent a business cycle effect or the country has shifted to
a higher growth path? I argue that it is the latter.
93. Inequality or
interest-group politics?: Professor Pranab Bardhan of the University of
California at Berkeley has recently resurrected inequality as the key
explanation for the impasse on the reforms (Financial Times, August 8,
2006). Is his claim right? At least as a general proposition, the link
between inequality and the ability
to implement reforms is highly tenuous.
92. Don't rush into
full capital-account convertibility (with Purba Mukerji): Tarapore
Committee-II on capital account convertibility is due to table its report on
July 31, 2006. Tarapore Committee-I, also appointed at the urging of Mr P
Chidambaram during his first tenure as the finance minister, had recommended
full convertibility within three years, ending 1999-2000 with specific goal
posts adopted. The Asian financial crisis sealed the fate of that recommendation
but the FM has once again revived the issue. We offer five reasons why India
should not rush into convertibility
91a. A historic
opportunity for India (with Jagdish Bhagwati): With the Doha Round at a
critical juncture, India has a historic opportunity to seize the leadership role
in bringing the Round closer to a successful conclusion. Such an initiative
promises to place India among key players on the world stage as it seeks the
Indo-US nuclear deal and a permanent seat on the Security Council.
91. Pro-market reforms
and growth: The embrace of pro-market reforms by the Left Front government
of West Bengal notwithstanding, anti-reform scholars continue to express
skepticism towards them. Distinguished Princeton political scientist Atul Kohli
has fired the latest shot on their behalf.
90. India and China as
Exporters: not in the same league: On GDP growth, India seems to be bridging
the gap with China. But in the world markets, the story is dramatically
89. Graft or not to
graft growth: The fight against corruption is surely a worthy cause on moral
grounds. But the case for turning it into the principal instrument of
development policy rests on much weaker foundation.
The claim by Wolfowitz in the speech in Indonesia that corruption is 'one of the
biggest threats to development in many countries' is just as hard to
substantiate as the assertion by his predecessor, James D Wolfensohn, that rich
country subsidies constitute the most important barriers to the development of
the poorest countries
88. Venturing into
Freakonomics: The recent best seller titled Freakonomics by Steven Levitt,
winner of 2003
Clark Medal awarded to the best American economist below forty years, has
sparked the interest of economists in providing surprising explanations of the
phenomena observed in everyday life. This column is about a similar
surprising explanation of a relatively recent experience.
on equity can hamper poverty reduction:
In their reply (Dec 23, 2005), WDR authors Francisco Ferreira and Michael Walton
question my critique. Among other things, they point out that whereas the WDR
2006 is concerned with equality of opportunity, my critique focused on equality
of income. This is puzzling since the bulk of my critique focused on policies
that impact opportunities directly, not just through income.
86. Free-trade skeptics:
Wrong again: Thanks to a handful of vocal free-trade skeptics among
pro-free-trade economists never have to fear being rendered redundant. In a
recent article in The Guardian (December 12, 2005), Larry Elliott writes that
according to Harvard economist Dani Rodrik, the experiences of
Vietnam and Mexico illustrate why liberal trade policies contribute precious
little to economic prosperity. But like the other arguments against trade
liberalisation by Rodrik, this one also appears plausible at first sight but
collapses in the face of careful scrutiny
Economic Times 2005
85. Hailing Hong
Kong, completing Doha: Contrary to the doom and gloom scenarios advanced
by many, the WTO ministerial conference at Hong Kong concluded successfully on
December 18, 2005, making significant progress towards completing the Doha
Round. True, the conference did not produce dramatic results. But that was
just as some among us had predicted: with the final round of negotiations
still a year away, few accomplished negotiators could be expected to put their
best offers on the table.
84. Salvaging the
Doha Agricultural Talks:
The assertion that the removal of agricultural subsidies by rich countries
would benefit the LDCs is false. And telling the rich nations that their
policies hurt the LDCs would not produce the desired outcome.
Another Year, Another Development Formula from the World Bank:
Entitled "Equity and Development," the
World Development Report (WDR)2006 of the World Bank is a great leap backward
in development thinking. Ignoring the lessons of 50 years of experience, it
advocates bringing equity to the center stage of development-policy
making. The report is not oblivious to the fact that virtually all agree
that the central goal of development policy should be to tackle poverty, not
82. The Challenge before
Pascal Lamy: Substnative liberalization under the Doha Round is possible
but not without developing countries making reciprocal concessions.
Hike or Expenditure Cut?: Most analysts agree that India must urgently
bring its gigantic fiscal deficit down. The real question is how
precisely to do it: through tax hike or expenditure cut? The two
remedies have very different effects on aggregate savings and therefore
Indophobia: Facts versus Fiction: US academics, journalists and
entrepreneurs as also visiting senior officials from India have fed the
American fears that Indians (and Chinese) are coming in large hordes to take
away American jobs. Are they right?
There is no Free Lunch: Recently, the Finance Minister said the investment
boom was leading to large trade deficit and he wants to cure it by opening
the floodgates of foreign investment. But the minister got it exactly
wrong: if increased foreign investment is to finance the domestic investment,
the current account deficit MUST rise! It is simply a matter of
understanding the savings-investment and balance-of-payments identities.
78. Why fiscal
deficits spell crises: The combined fiscal deficit of the centre and
the states in India has been running at around 10% of the GDP since 1999. India
has also accumulated a large public debt that stands between 80 and 85% of the
GDP currently. These facts have led many to suggest that India may be heading
towards another macroeconomic crisis.
India-China Free Trade Area?: The case for an India-China FTA is
based principally on its strategic value. During the last decade, with the
creation of the NAFTA, several expansions of the EU and a host of smaller FTAs
in Latin America, Asia has suffered from a diversion of these regions' trade
away from it. One response to this trade diversion for Asia would be to
move towards a bloc of its own. Such a bloc may give Asia the necessary
leverage to pry open the NAFTA and EU blocs to outsiders through multilateral
liberalisation will hurt LDCs: While the overall costs of
agricultural protection and subsidies in the rich countries fully justify their
dismantling, the policy discourse on the subject has suffered from deliberate
obfuscation, with political correctness rather than economic logic driving it.
75. Surrender to
multinationals: India is about to lose on the home front what it had
won in Geneva--its Patent Ordinance gives pharmaceutical multinationals what the
United States had failed to win for them at the negotiating table.
Reform the Top Civil Service: In India, under the Parliamentary
system, the Cabinet must be selected from among the Members of Parliament who,
for the most part, are career politicians. As such the chances that
experts will hold the Cabinet positions are negligible. This fact places
the top-level bureaucracy in India in an enormously privileged position: most
Cabinet members look to their secretaries for guidance when it comes to
policymaking. Under such circumstances, if the secretaries and those
immediately below them also happen to lack the necessary expertise, we run the
risk of blind leading the blind.
Muddles on Forex for Infrastructure: The
best economists of India, both inside and outside the government, are locked in
a fierce debate on the proposal for swapping infrastructure for foreign exchange
reserves, put forth by the Planning Commission. A key concern raised in the
debate is that dollars can be spent only on imports while infrastructure largely
requires the acquisition of domestic resources. Careful analysis reveals,
however, that at least this concern is without foundation: the import intensity
of infrastructure is virtually irrelevant to the final outcome!
Back to Top
Get set to weave history:
India stands on the threshold of a historic opportunity to accelerate the
growth of manufacturing. Textiles and clothing account for nearly 40% of
India's manufacturing output. And the time for giving this highly labour-intensive
sector a major push has never been better. Will Dr. Singh's government
seize the opportunity?
71. Are we
spinning the right yarn?: The
quota regime that has governed the exports of textiles and clothing from
developing countries to the United States, European Union (EU) and a few other
developed countries for nearly four decades will meet its demise on January 1,
2005. Is India ready to capture a much larger share of exports to these
Bipartisan Predicament: Few proponents of reforms had thought that
in a controversy between the Planning Commission deputy chairman Montek Singh
Ahluwalia who symbolises pro-market reforms and the Left that abhors them,
they could side with the latter. Yet, sadly, that is where some of us find
ourselves in the controversy over the appointment of foreigners and employees
of multilateral institutions to the consultative groups of the Planning
69. Kelkar's Balancing
Act: Fiscal Responsibility and Budget
Management (FRBM) Act, 2003 requires that the revenue deficit be eliminated
entirely and fiscal deficit be reduced to 3% of the GDP by 2008-09. The
Act also requires that each year the revenue deficit be reduced by 0.5% of the
GDP and fiscal deficit by 0.3% of the GDP until the final 2008-09 target is
reached. How can this be achieved? The recent report of the Kelkar
taskforce offers a roadmap.
Trade Policy Forward:
the human face, not scar face:
Goodbye to Double-Digit Growth Rate:
Some of the most important
reforms have been shelved and many bad policy proposals are
being floated in the name of reform, dimming the prospects for
double-digit growth under the present government.
65. Reforms do
have a human face: Politicians seeking limelight have focused
disproportionately on the achievements in the information technology sector,
fuelling the impression that reforms have helped only a blessed few. But this is
a gross distortion of the true picture.
with Nationalization: The
recent episode of the flirtation by the ministry of finance with the idea of
effectively nationalising the Infrastructure Development Finance Corporation (IDFC),
resignations by seven senior executives of the corporation in response, and the
subsequent backtracking by the ministry offers an unusual glimpse of the
vestiges of the pre-reform-era thinking in the ministry
Outsourcing: The Culprit for Jobless Recovery? Some
influential politicians in the United States are advocating policies
that threaten to repeat the mistake made by India nearly two decades
ago. They argue that outsourcing is behind the massive losses of
white-collar jobs in the US and would like to impose restrictions on it.
But the argument is flawed.
the low-investment trap: While
interest rates have declined dramatically recently, private investment
has remained stagnant. Why and how do we get out of this trap?
price free-trade agreements?
India is moving aggressively toward signing FTAs. Is this the right road?
Back to Top
Economic Times 2003
the reforms failed India?: Distinguished
economists Bradford DeLong of the University of California ,
Berkeley and Dani Rodrik of Harvard University separately argue that reforms
cannot be credited with India ’s high growth rates in recent years because the
shift in the growth rate preceded the reforms of the 1990s.
In a related but slightly different vein, economist Joseph Stiglitz contends
that India is one of the two most impressive economies today (the other being
China ) and that India also, like China , has
bought the least into the globalisation story that the IMF and others are
selling. Are these right claims?
the Indian miracle inevitable?: Can the lower interest rates,
favorable demographic transition and home-grown multinationals really deliver
the Indian miracle? Happy dreams...
58. A Godsend
for Developing Countries: What does WTO really do to be decried
as the "World Terrorist Organization" by a rally supported by
three former Prime Ministers of India?
this is success, what will be failure?
role in the WTO negotiations has turned less negative but it has some ways to
cola: When NGOs operatre in
their areas of expertise, they can force important policy debates and policy
changes in democratic countries in not just developed but also developing
countries. Here is a beautiful example from India
Macroeconomy & Policy Change: Given India's success in achieving
macroeconomic stability during the last half century, it is ironic that the
study of macroeconomics in India has lagged far behind that of microeconomics.
For this reason alone, the recent volume Macroeconomics
and Monetary Policy: Issues for a Reforming Economy, edited by M. S. Ahluwalia, Y. V. Reddy and S.
S. Tarapore, honoring
Chakravarti Rangarajan, the first academic economist to serve as the Governor of
the Reserve Bank of India and a much-admired figure among Indian economists and
policy makers, is a useful addition to literature on economic reforms in India.
54. Adopt a Single,
Uniform Tariff Rate: The exisitng trade policy commitment in a previous
budget speech is to unify tariff rates around two rates of 20 and 10
percent starting 2004-05. But why not adopt a single, uniform rate
of 15 percent instead?
53. Free-trade Skeptics:
Skeptics After All?: Do free-trade skeptics such as Joseph Stiglitz and Dani
Rodrik recommend protection? Not really, if you read carefully.
52. Without Trade
Openness, There is no Sustained Growth: So trade openness is not sufficient
for growth. But can you do without it? And are there autarkies or
near autarkies in the developing world that have rapidly reduced poverty?
to break the TRIPS impasse?:
The negotiations on how to allow poor countries to take advantage of the
compulsory licensing provision of the TRIPS Agreement are at an impasse.
But there is a way to break the logjam.
Move, Mr. Jaitley!:
The United States has proposed that all tariffs on non-agricultural goods
be reduced to 8 percent or less by 2010 and to zero rate by 2015. This
offers India a gloden opportunity to either make a huge economic gain or win a
major tactical victory. But will Arun Jaitley, India's new Commerce
to Diwan-e-Aam: Policy changes in India are no longer by stealth.
Indeed, Kelkar has now brought the process out of the diwan-e-khaas to diwan-e-aam. Critics of his
reports have been unsparing but are they right?
Economic Times 2002
48. Welcome Aboard Mr. Stern:
Abandoning the exclusive focus on the rich country protectionism and complacency towards the poor country protectionism, the World Bank Chief
Economist has now forcefully condemned the latter. This is good news. But the World Bank also needs to pay attention to the nuances while
propagating the view that agricultural subsidies and protection in the rich countries inflict huge injuries on the poor countries. The removal of these
intervention will no doubt benefit the developing countries as a whole but it will
also hurt the majority of the poorest countries.
tax system for the 21st century:
In less than two months, the Kelkar taskforces on direct and indirect taxes have spoken. They propose to overhaul the
Indian tax system. The question is whether Jaswant Singh will show the necessary courage.
Tackling the Crisis in Higher Education: Besides, railways and nuclear power, the only state monopoly remaining in India is the one on issuing university degrees.
Universities in India can be established only by an Act of Parliament, Act of a State Legislative Assembly or by the University
Grants Commission (UGC) "deeming" an institution university. UGC centrally controls all major functions of universities and
colleges. Not surprisingly, the Indian higher education system is in a quiet crisis on both quantity and quality dimension.
in economics: This year's economics laureates — economist Vernon Smith of George Mason University and psychologist Daniel Kahneman
of Princeton University — have both been pioneers in the field of experimental economics. But the similarity between their
contributions ends there.
case for import substitution?: Does evidence point to ISI leading to a golden age of growth in
developing countries and liberal trade policies, deregulation and privatization going no where?
43. Resolving the RBI
dilemma: RBI foreign exchange reserves now exceed $60 billion. Must it keep accumulating or there are other alternatives? Read on for some
42. Potentially disabling aid:
Are the calls for raising aid flows to 0.7 percent of the industrial countries' GDP grounded in proper analysis? Have
those making the calls offered a roadmap of how they can use this larger amount
effectively to promote the Millennium Development Goals?
41. Is this free meal
worth having?: Under the Generalized System of Preferences (GSP), developed
countries grant one-way tariff preferences to developing countries. But
the experience with these preferences has been even less encouraging than that
40. Why India lags
behind China?: Skeptics say that exports have not responded to trade liberalization. Are they right? And even if they are wrong, why has
the response in India been more muted than in China? Here is one hypothesis.
Dump the anti-dumping?: India is now the top ranking user of anti-dumping. The Economic Times asked three specialists to write on "Should
anti-dumping be dumped?" My take: This is a no-brainer. WTO members should
jointly agree to outlaw the use of this self-destructive weapon. But should they
fail to do so, countries should unilaterally discard it from their arsenals.
39. Stamping in Nutrition:
“THE poor are a gold mine,” wrote economist Thomas Sowell two decades ago,
arguing that often anti-poverty programmes benefit those who administer them
rather than those for whom they are administered. India’s food procurement, storage and distribution system lends
unequivocal support to
Sowell's contention: Out of every Rs. 100 spent on food subsidy in India, only Rs. 3.70 reached the poor in the year 2000-01.
38. The right recipe:
Those of you old enough to remember Mother India, the first Indian film to be nominated for an Oscar,
would remember its hero Sunil Dutt sitting on top of a mound of grain and trying to keep the villain from
taking it away. Well, gone are the days. We now have the Food Corporation of India sitting on top of
a mountain of grain, trying to keep the rains from washing it away. How did we arrive here? What
should be done?
37. On Generating Employment:
Because of its large and growing population, the threat of “employment
problem” is never far from the minds of policymakers in India. Yet, there are
good reasons for the ambivalence of economists towards such a threat. The old
saying that the child is born not just with a mouth to eat but also two hands to
work carries much wisdom.
36. Redeem Last Year's
Promises: Last year, in what was a truly historic budget, Finance
Minister Yashwant Sinha had announced several major reforms.
But the Vajpayee government utterly failed to deliver on them.
The forthcoming budget must offer credible commitment to undo this
Year's Day Special: The
Economic Times invited three economists (Jagdish Bhagwati of Columbia
University, Kaushik Basu of Cornell University and Arvind Panagariya of the
University of Maryland) and two industrialists (Azim Premji of Wipro and R.
Back to Top
Barriers to Scholarship in India: Our persistence in
obstructing foreign scholars and scholarship in India is unfortunate. We
continue to subject all research projects by foreign scholars to an
elaborate approval process involving one or more ministries.28.
Savouring a Decade of Reforms: THIS month marks the end of the
first decade of India’s economic reforms. What have we accomplished?
India Arrives at the WTO
: If you were at the summit and
heard the frequent assertions in the corridors and the pressroom that
India was hell bent to bring down the launch of the new round, you would
likely believe the harsh assessments that appeared subsequently in the
Western press. But did India truly fair so poorly?
India at Doha (2):If victory and defeat were judged by juxtaposing
the initial objective and final outcome, India suffered an unequivocal
defeat in Doha. But by that count, Doha produced no winners.
Milton Friedman on India in 1955: “A
FIVE per cent per annum rate of increase in real national income seems
entirely feasible...” If these opening words in a memorandum addressed
to the government of India do not impress you, think again: the date on
the memorandum is November 5, 1955 and its author is Milton Friedman,
the 1976 Nobel Laureate in Economics.
Nobel Prize, 2001: This year, I successfully predicted all three
Nobel laureates and surprising a figure no less than Professor Assar
Lindbeck, the chairman of the Nobel Committee from 1980 to 1994.
Rigid Labor Laws: a Minor Barrier to Growth?: “Removing the
main barriers to growth would free India’s economy to grow as fast as
China’s, at 10% a year.” This
is the central conclusion of a recent report entitled “Achieving
India’s Economic Growth Imperative” by the McKinsey Global
Launching the Qatar Round: India has expressed its
clear opposition to the launch of a new round of multilateral
negotiations at the forthcoming WTO ministerial in Qatar.
India’s position is not without justification.
Yet, unless intended to be an interim, tactical move, it can hurt
our ultimate interests. We
have much to gain from a new round provided we actively engage in
shaping its agenda.
In this feel-good piece, I demonstrate that the focus on incremental
reforms in individual years results in an understatement of the totality
of India's achievements.
Why did Singapore and Hong Kong Escape Protection?: Singapore
and Hong Kong have been the most open economies in the world during the
past fifty years. How do we explain
this success of the two economies during a period when all other
developing countries found themselves resorting to protection?
The Indian Diaspora in the United States:
Can the Indian Diaspora play the same role in the economic
transformation of India that the Chinese Diaspora has played in the
People’s Republic of China (PRC)?
Korean Growth Experience: The contribution of infant industry
protection to Korea’s growth is at best controversial and at worst
negative. But even if one accepts it to be positive, there are two
reasons why it is safer today to err on the side of non-intervention.
End the State Monopoly on Higher Education
: Last month, when I wrote that public-sector monopoly in India
had been abolished in virtually all sectors except railways, I made one
major error of omission: higher education.
Fertiliser Subsidy: We spend more than 0.7 per cent of
India’s GDP on fertiliser subsidies. This is almost twice the entire
amount we spend on higher education.
Unshackling the Old
: The major new stimulus to growth must come from further freeing
up of the Old Economy, which lags behind the unfettered New Economy.
The Shoe is now on the Other Foot: In a recent report entitled
Unfair Advantage: Workers' Freedom of Association in the United
States under International Human Rights Standards (August 31, 2000),
Human Rights Watch offers a stunning indictment of the laws governing
worker rights and their enforcement in the United States.
Defending Free Trade: Mathematician Stanislaw Ulam once asked
economics Nobel Laureate Paul Samuelson whether he could point to an
idea in economics that was universally true and not obvious at the same
response was the “principle of comparative advantage.”
The New Tyranny of the Auto Industry:
We persist in ignoring the lessons of our own experience and stand ready
to punish the consumer in favour of narrow, short-term industry
interests. By all accounts, the government is poised to replace import
licensing on used cars by prohibitive tariff duties and technical
Nobel Prize 2000: The statistical techniques of measurement,
for which Heckman and McFadden have been awarded the prize, may seem
esoteric to a non-specialist. Yet,
they are an indispensable part of the tool-kit of an empirical
Bringing Competition to Bureaucracy: Since politicians usually
lack specialized skills, the burden of policy making often falls on the
top layer of bureaucracy. But what if top bureaucrats themselves
lack these skills? We then run the risk of blind leading the blind.
A Golden Opportunity For India: During
his forthcoming visit to the United States, Prime Minister Atal Behari
Vajpayee will have an unusual opportunity to promote the Indian
viewpoint among the U.S. leaders and policy makers on issues of mutual
interest to the two nations.
Exit Policy: The ban on retrenchment has produced few winners.
Under the threat of strikes, it has forced firms to tolerate
extreme inefficiency. The ban also discourages entrepreneurs from
seeking entry into labour-intensive sectors and employing
Separating Milk and Water:
The calls for very large duties on imports by Prakash Singh Badal, the
chief minister of Punjab, are misplaced.
The Anti-reform Lobby
Has Got It Wrong:
While Prime Minister Vajpayee and Sinha must fight their own battle with
the Swadeshi Jagran Manch, the gratuitous attack by the critics on the
left is altogether a different matter.
The World Bank under Fire:
The Meltzer Commission has harsh words for the manner in which the World
Bank has served the poor in developing countries in recent years.
: In spite of the public confidence he enjoyed, or perhaps because
of it, Pundit Nehru used every opportunity available to him to explain
to the lay public and intellectuals alike the rationale behind the big
economic initiatives he had been undertaking or planning to undertake.
Time to Return to
: India's tariff liberalization has come to a virtual halt. It is
time to resume it in the 2000 budget.
Yes to IPRs, No to
their Inclusion into the WTO
: The TRIPs Agreement has become an effective instrument of
promoting more non-trade agenda by labour and environmental groups.
They say the WTO must now do for workers and nature what it has
already done for corporate interests.
My Millennium Wish:
The road will be
much rougher as reforms move into difficult areas such as banking.
Nevertheless, the double-digit growth appears well within the
grasp of the country.
Back to Top
Economic Times, 1999
Failure without Losers: Given where the
round was heading, even pro-free-trade economists such as myself are
relieved for the moment
The Return of Labour
Standards in the WTO?
With the Seattle Ministerial meeting right around the corner, the United
States has tabled a proposal for a working group on labour standards at
the World Trade Organization (WTO).
WTO Negotiations: Invest in
Research: Even large developing countries such as India seem
to lack the capacity for systematic research on how best to promote
their interests in trade negotiations.
Narrowing Down the Seattle Round Agenda: Defining the agenda
is the first stage of a negotiating game, which every player must take
with utmost seriousness.
“Extravagant” Predictions of Benefits to developing Countries from
the Uruguay Round: Jagdish Bhagwati had warned even as the Round was
approaching closure that appeals to overly optimistic predictions could
undermine future trade liberalization.
How can developing countries maximize the benefits from the Internet and
how should they approach the issue at WTO?
Let Us Not Shoot Ourselves in the Foot:
Anti-dumping is turning into a lethal instrument of protection in
India. Does its aggressive use make sense?
Back to Top
Economic Times 1998
Dealing with investment in WTO: On a net basis, developing
countries play the role of the `host' country to foreign investment while
developed countries serve as the `source' country. This asymmetry leads to
a divergence in the interests of developing and developed countries. Thus,
the issue has a clear North-South dimension.
WTO and Developing Country Interests: The Uruguay Round (UR)
Agreement stipulates that, beginning January 1, 2000, WTO members will
launch a round of negotiations for trade liberalisation in agriculture and
services. With that date approaching, there is now a talk in international
policy circles of a millennium round of multilateral trade negotiations (MTNs).
How should the developing countries such as India approach this
Full convertibility: Must we have it?: Should India
embrace full capital account convertibility in the near future? And was
Prime Minister Mahathir of Malaysia wise to reintroduce controls in the
wake of a crisis? The answers to these questions are asymmetric: while
India is well advised to wait before entering the world of convertibility,
Mahathir was ill advised to exit it.
-4. Is India returning to
protectionism? If Mr. Sinha is serious about reclaiming the trade
reform for the country, he must resist pressures from the industry for
lower excise duties and also explain to the public that when tariffs are
reduced, increases in excise duties overall are entirely consistent with
-5. SAARC: Follow
APEC, not NAFTA: Despite much enthusiasm on the part of some
regional leaders and policy analysts, the creation of a discriminatory
trade bloc in the region, dubbed the South Asian Free Trade Area (SAFTA),
along the lines of the NAFTA will be a mistake. The region's interests
will be served by following the APEC model which calls for full adherence
to the Most Favoured Nation (MFN) principle and, hence, nondiscrimination
in trade policy.
Back to Top
Wall Street Journal
and New York Times
Ending Aid to Rich Farmers May Hurt the Poor Ones By EDUARDO PORTER
(NY Times): This story features my analysis of the agricultural subsidies in
the rich countries and their impact on the poor countries.
Fuzzy Trade Math. Trade talks at Cancun broke down
principally because the G-20 group of mainly larger developing countries
rejected U.S. and EU offers on reducing their agricultural protection. Two
years later, as the Hong Kong Ministerial approaches, agriculture remains the
make-or-break issue in the Doha negotiations. But the impasse can be broken.
Passage to Prosperity: The right strategy for India is to walk on
two legs: traditional labor-intensive industry and modern IT. Both legs need
strengthening through further reforms; and four specific reforms are of
4. The bra in
your wardrobe: The longstanding Multi-fiber Arrangement (MFA) on
Textiles-next to agricultural subsidies and trade barriers the most
objectionable trade-restricting affliction of the world trading system-will
finally become history on Jan. 1, 2005. The textile lobbies in many rich, and
in some poor, countries are scrambling already to resurrect its protective
effects in alternative ways: for the removal of the MFA means that the rich
countries will face more competition; as will those poor countries, with no
inherent ability to compete, that had developed production simply because they
had a guaranteed MFA quota.
3. Can Dr. Singh Cure his Economy? In May 2004, when India unexpectedly voted into
power the Congress and its allies (later renamed the United Progressive
Alliance) and Manmohan Singh became prime minister, it was a dream come true
for proponents of economic reform. Four months into the UPA rule,
prospects are less rosy. GDP growth, which had touched 8% in 2003-04, is
set to decline to 6% this year. Inflation, at 3.4% in 2002-03 and 5.4% in
2003-04, has edged up to 7.5%. Will Dr. Singh repeat his innings of the
Expectations (May 24, 2004): The BJP got voted out of power not
because its reforms left the poor behind--they did not--but because the
success of the reforms in raising the incomes of all including the poor gave
rise to a revolution of rising expectations.
Rich Man, poor Man (September 16, 2003): Just prior to the Cancun WTO
Ministerial, a compromise on access to medicines for poor countries had
raised hopes that the Developed and the Developing could resolve their
differences after all-and that the Doha Round might actually move forward.
But the talks at Cancun have collapsed and the opportunity is lost. But
Cancun is no Seattle. At Seattle, the WTO members tried and failed to launch
a new round whereas at Cancun they have failed to move an ongoing round
forward. The more apt analogy is with the failure in Montreal in 1988 when
developed and developing countries had failed to advance the Uruguay Round.
Back to Top
The pursuit of equity threatens poverty alleviation: Critics of
pro-market reforms increase inequality and this in turn is driving the
citizens of China, India and Latin America away from reform. The
conclusion is based on faulty analysis of the evidence.
Exchange with the Oxfam on agricultural liberalization by the developing
countries. The gains from specialization exist in
agriculture, too. Just as the countries that liberalized in manufactures
benefited those that liberalize agriculture will benefit as
13. Higher food prices will indeed hit poor (Letter, August
12, 2004): William R. Cline's reaction (Letters, August 9) to my exposure of
the fallacy that the removal of the rich country subsidies and protection in
agriculture is desirable because it will do most good to the least developed
countries (LDCs) is to deny the fallacy by assertion.
12. The tide of free trade will not float all boats (Op-ed,
August 3, 2004): Thanks to the advocacy of a few pressure groups and many
international institutions, there is now a near-universal agreement that
developed country subsidies and protection in agriculture hurt the poorest,
least developed countries. This is a telling example of how political
correctness can lead to the acceptance of an economically incorrect
11. Countries that react to growth opportunities by opening up will enjoy
sustained success (Letter, May 10, 2004). Martin Wolf ("How managing
growth can consign poverty to history", May 5) is right on the mark when
he points out that trade openness is a necessary, even if not sufficient,
condition for sustained, rapid growth. Ironically, some globalisation
advocates have ended up hurting their cause by suggesting indirectly that
trade openness by itself is sufficient to raise the growth rate.
10. World Bank and IMF show welcome revisions to stance
on developing countries and trade: (Letter with Jagdish Bhagwati, December
24, 2003): Sir, The article by Horst Kohler of the International Monetary
Fund and James Wolfensohn of the World Bank in support of the multilateral
trading system and the Doha round is welcome, especially as it belatedly
repairs important sins of commission and of omission by these Bretton Woods
institutions ("We can trade up to a better world", December
9. Bilateral Trade Treaties are a
Sham: (Op-ed with
Jagdish Bhagwati, FT July 13, 2003) Bilateral deals fragment the coalitions
of developing countries, as each abandons its legitimate objections to the
inclusion of extraneous issues in trade treaties. Having abandoned these
objections in a bilateral deal with the US, how can those countries pursue
them in WTO negotiations?
Trojan Horse for Africa: (Op-ed with Jagdish Bhagwati) The Africa Act
offers more to US lobby groups than to participant countries.
The Truth about Protectionism:
(Op-ed with Jagdish Bhagwati) just as the Jubilee 2000 movement triumphed
where many exhortations to give debt relief had failed, we could now count
on a church-led movement, a Jubilee 2010, to do the same for ending rich
NAFTA has harmed the Cause of Free
: (Letter) You seem to accept too readily the conclusion in the recent
World Trade Organisation report that these agreements have been
"complementary" to multilateral liberalisation ("WTO's
blessing for trade groups", April 27). Surely, this conclusion is
Free Trade Target Date Essential to Remove “Spaghetti Bowl” of
Barriers: (Letter) As economists deeply interested in the future of the
world trading system, we and a group of economists worldwide would like to
urge the member states of the WTO to make the endorsement of a target date
for free trade their first priority.
FTAA and President Kennedy: (Letter) This provides an opportunity to
re-think the issue and to convert the original goal of free trade only for
the Americas into a co-operative regional agreement (like Apec) and
simultaneously to pressure trade liberalization multilaterally at the
World Trade Organization. That
is the model, also of President Kennedy’s celebrated, but premature,
Alliance for Progress for South America.
Integration Can Help Reduce Poverty and Act as Force to End Child Labor:
(Letter) In Bangladesh, the garments industry, which had expanded greatly
with exports due to global integration, played a major role in reducing
the country's poverty. And ironically, it was the threat of
"anti-globalization" sanctions from US, rather than
globalization, which harmed the children.
WTO: US Demands Threaten Seattle Meeting: (Letter) The US demand
for a World Trade Organisation working group that will draw up a report in
two years on the relationship between international trade and labour
standards risks scuppering the Seattle ministerial meeting.
1. Poverty Reduction Starts with Growth: (Letter) It is possible to
immediately reduce poverty by redistributing from a fixed pie. But even
that must be discounted when the pie is small and poor are many. Give
every Indian his country's per-capita income and you will have him living
on a dollar and 10 cents daily.
Back to Top
Times of India
and Hindustan Times
India: U.S. Action under Super-301: On May 25, 1989 U.S. declared
India, Brazil and Japan to be “unfair traders” under Super-301.
Specific charges were brought against each country.
Liberalise Consumer Goods Imports: Though liberalization of consumer
goods imports has been controversial, at present, the case for it is
Myths and Realities of Neem-Based Patents:
Can Neem be patented? If not, what is the controversy surrounding
patents based on Neem products?
Child Labor and Rugmark Label: While rejecting the case for a
social clause, however, many developing country critics of child labor have
suggested that alternative strategies be adopted to combat the practice.
Among these is the use of “social labeling” which effectively
gives the consumers the option to refuse to buy goods produced by child
Walking on Two Legs: If we go by the latest census data, as late as
2001, 77 per cent of India's population lived in rural areas and 59 per
cent earned its living from farming. Given farming generates less than a
quarter of the national income, it offers a significant proportion of the
farmers barely the subsistence income. I have argued for some time now
that if India is to transform itself from this primarily agricultural to
modern economy, it must walk on two legs: unskilled-labor-intensive
manufacturing and skilled-labor-intensive services
Back to Top
5. Economics Focus: Punch-up over handouts:
Free-trade economists question the widely held view that the removal of rich
country subsides will benefit the least developed countries.
4. Economics Focus: Trade
Disputes: Might the new wave of outsourcing to poor countries be
different from trade in manufacturing, and make rich countries poorer? A
paper by Jagdish Bhagwati, author of a recent book on globalisation,
Arvind Panagariya, his colleague at Columbia University, and T.N.
Srinivasan of Yale provides more help. They show, also using classical
trade models, that outsourcing is no different in economic terms from
the trade that has been going on since Ricardo's time. The standard
results still hold.
Going too Far in Support of Trade: Economics Focus column of the Economist, December 14, 2000, which covered the paper
Against Export Subsidies by Arvind Panagariya.
: (Letter in Economist) Criss-crossing FTAs are replacing
non-discriminatory tariffs with a spaghetti bowl whereby tariffs vary
according to the ostensible origin of the product...FTAs also lead to
increased protection against outside countries, turning even an
initial movement towards free trade into a movement away from it.
Trading Views: (Letter in Economist) You note that Mexican
exports to the United States have surged in the past two years. You also
note that only 117,000 American workers have come forward to claim the
benefits offered to those displaced by NAFTA. These facts together
strongly suggest that much of the NAFTA-induced growth in Mexico's
exports has come at the expense of other countries and thus constitutes
Higher Education Supplement
A Current Account of Activity: Review in the Times Higher Educations Supplement
of The World Bank: Structure and Policies edited by Christopher
L. Gilbert and David Vines. No
multilateral institution suffers more from an identity crisis today than
the World Bank. Globalization
has brought private capital to the doorsteps of most developing
countries, seriously undermining the Bank’s central
Why did the Chicken Cross the Globe?: Review in the Times Higher
Educations Supplement of On the Edge edited by W. Hutton and
A. Giddens. The book offers a dozen essays on “global capitalism”,
ranging from insightful and incisive to ill-conceived and ill-argued.
The authors include sociologists, international finance experts,
policy analysts and journalists from the rich countries and a well-known
activist from India.
Vision for 2010: Guest column for a special issue of India Today,
February 19, 2001. Where are we likely to be in 2010? Our growth
rate during the next 10 years is likely to average 6 to 7 per cent. This
is the same rate I had predicted in 1994 for the decade of the 1990s.
With growth rate in 1993-94 at a measly 3.8 percent, the prediction was
viewed as hugely optimistic at the time; today, with the economy already
growing at 6 per cent, it is likely to be viewed as pessimistic.
Plenty's Scarcity: Review in India Today of Eight
Lectures on India’s Economic Reforms by T. N. Srinivasan.
These eight gems, cut and shaped to perfection by a master craftsman,
offer the reader a panoramic view of the economic reforms undertaken by
India since 1991 and those that still await it.
It's a big world out there: Where does India stand in the
global trading system after ten years of the existence of the WTO?
The report card is at best mixed.
At the Half-way Mark (July 12, 2004): The key question while
assessing the first United Progressive Alliance (UPA) budget is whether
it indicates that the progressive, pro-reform wing of the
Congress—which the prime minister and the finance minister
represent—remains truly in charge of policy. The answer to this
question is a qualified and cautious yes.
Don't Prick the Bubble (May 31, 2004): It is nonsense to pin
the anti-NDA vote on to the reforms and not anti-incumbency.
It is the Reforms, Stupid!: Guest column for a special issue of Outlook,
December 17, 2001. Is the Indian economy as immune to the current
slowdown in the global economy as some press reports and commentaries
suggest? And should we be
thanking our policy makers for holding back reforms, rapidly approaching
inaction, to bring about the presumed stability?
Back to Top