Business Standard (12)

MSMEs: separating wheat from chaff

Do not look for easy interventions to help small-scale enterprises - carry out the reforms that will let them grow big Read full article Abstract: Realisation that the small-scale industries (SSI) reservation had failed to deliver on employment creation while impeding export growth led India to systematically roll back that policy beginning in 1997. While we have barely reached the tail end of the rollback with 20 items still remaining on the reservation list, the old view that small-scale enterprises are the silver bullet that will solve India's jobs problem has resurfaced. We are being advised to forget about labour law reforms and labour-intensive manufacturing in the organised sector and count instead on micro, small and medium enterprises (MSMEs) in the manufacturing sector for good jobs for the masses. Possibly, these commentators feel exasperated by the hesitant response of large-scale firms to the removal of the SSI reservation. But the hesitant response is due to yet another layer of regulations embedded in Indian labour and exit laws. These regulations have continued to hold back entry of large-scale firms into labour-intensive…

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A different kind of CM

Vasundhara Raje is pioneering the 'Rajasthan Model', which places policy reform at the centre of the development strategy Read full article Abstract: Bihar, Chhattisgarh, Gujarat and Odisha, which have all delivered excellent growth and development outcomes for their citizens during the last decade, have one thing in common: they all have had chief ministers who provided generally clean and transparent administration and effective implementation of infrastructure projects and social schemes. Policy reforms that economists often advocate were not a major part of their strategy. In areas covered by the Union and Concurrent Lists of the Constitution, these states took as given the laws enacted by the central government. And in areas included in the State List, with rare exceptions such as the agricultural produce marketing committees Act and the repeal of the urban land ceilings Act, no new legislative actions were taken. Vasundhara Raje Scindia, the chief minister of Rajasthan, is now breaking that mould. She is pioneering what may be called the "Rajasthan Model", which places policy reform at the centre of the development strategy. She has begun with…

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A flexible deficit target

The author explains why his suggestion of the fiscal deficit at 4.5% of GDP differs from P Chidambaram's 4.1% in the interim Budget Read full article Abstract: A controversy was recently triggered when I told an interviewer that the fiscal deficit at 4.5 per cent of gross domestic product (GDP) in the fiscal year 2014-15 was within tolerance limits if accompanied by an increase in capital expenditure from 1.76 per cent of GDP in the interim Budget to two per cent. Former finance minister P Chidambaram reacted sharply to the suggestion, asking rhetorically, "Will the government follow the Kelkar-recommended path and affirm the Budget estimate fiscal deficit of 4.1 per cent for 2014-15 [as provided in his interim Budget]? Or will the government take the advice of Arvind Panagariya (wrong advice in my view) and allow the fiscal deficit to rise?" There are both political and economic responses to the objections aided by Mr Chidambaram. The political response is twofold. First, as R Jagannathan has already noted in a brilliant column, Mr Chidambaram himself is responsible for the original sin of deviating from the…

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The choice on offer

A Narendra Modi administration would believe more in decentralisation than would a Rahul Gandhi administration Read full article Both the Congress and the Bharatiya Janata Party (BJP) manifestos are now out. They, along with the speeches by the leaders of the two parties, provide the basis for the comparison of likely administrations under them. There is agreement between the two sides on objectives: both would like to rapidly end poverty, illiteracy and ill health and modernise India. But the preferred policy instruments markedly differ. The BJP manifesto largely reflects the view articulated by Narendra Modi in his numerous speeches in the last two months. He argues that growth and social spending it makes possible are for all citizens and actively opposes discrimination based on religion citing the Constitution. Therefore, he is likely to rely first and foremost on growth and development to eradicate poverty, illiteracy and ill health. Mr Modi firmly believes in building highways, railways, cities and universities to modernise India and to create jobs that would empower people to access housing, education and health. In assessing schools for…

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India must call the US' bluff on patents

The recent US-India friction over trade is being driven by Big Pharma Read full article Apart from the deterioration of the business environment generally, which impacts both domestic and foreign investors, retrospective taxation has figured most prominently in the media as the principal cause of growing scepticism among foreign investors. Entirely missing from the discourse has been an equally potent factor with wholly foreign origins: the hijacking of the economic policy dialogue between the United States and India by pharmaceutical lobbies in the US. Big Pharma has convinced the US government that the country's interests are synonymous with its own. With its own list of grievances against trade restrictions in India, the National Association of Manufacturers, a lobby group of the United States manufacturers, has lent its support to the pharmaceutical industry. Big Pharma is currently using its considerable clout to pressure the United States Trade Representative (USTR) into designating India as a "priority foreign country" in its 2014 Special 301 Report due on April 30, 2014. The designation is reserved for the worst offenders of intellectual property rights and…

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