Economic Times ⁽²¹⁸⁾

As China's experience shows, growth rate is not just a sideshow in the social development debate.Read full article In a recent op-ed in The Hindu , Amartya Sen has clarified his views regarding what importance we should assign to growth in the policy discourse . Coming as it does in response to a debate on the Cuts Forum to which I had actively contributed, Sen’s clarification justifies a rejoinder by me. The lively debate on the Cuts Forum had been triggered by a lecture Jagdish Bhagwati had delivered at a joint session of the Parliament on December 2, 2010 and subsequent remarks Sen made on India-China growth comparisons while speaking in New Delhi. Bhagwati , who actively contributed to the Cuts Forum debate, had emphasised in his Parliament lecture the centrality of growth to poverty alleviation firstly as a force that “pulls up” the poor into gainful employment and secondly as a source of revenue to expand anti-poverty programmes. In contrast, in his New Delhi talk, Sen had argued that the Indian fixation with surpassing China’s rate of economic growth was…

The mega corruption scandals - Commonwealth Games, 2G spectrum, Adarsh society and foodgrain - have dominated the headlines in India in recent months.Read full article The mega corruption scandals - Commonwealth Games, 2G spectrum, Adarsh society and foodgrain - have dominated the headlines in India in recent months. The mood around the country, especially among intellectuals, has been one of despair. Many argue that these scandals represent the total breakdown of governance and will prove fatal to India's growth story and its ambition to become a global power. Are these fears justified? To be sure, the monetary magnitudes associated with corruption scandals have escalated with rising incomes, many more scandals than in the past have come to light recently and the central government appears largely paralysed. Yet, the reality on governance is more complex, requiring careful analysis before jumping to doomsday scenarios.

The impact of the Andhra ordinance on MFIs must yield useful clues to design future regulatory policies.Read full articleConfusion continues to reign in the debate on microfinance that has unfolded following the promulgation of the Andhra ordinance, soon to be replaced by Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act, 2010. A key confusion has been that microfinance is a major instrument of poverty alleviation. Going by the available scientific evidence and agreement among scholars, to-date, there exists no compelling study linking the expansion of microfinance to declining levels of poverty. Despite the images of groups of women starting small business projects to exit poverty, commonly promoted on the websites of microfinance institutions (MFIs), the use of microfinance for such projects has been surprisingly tiny. According to a recent survey conducted in Andhra Pradesh, households use less than 2.5% of all micro-loans to start new businesses. By comparison, many more loans go into buying stocks - as much as 10% when the source of the loan is an MFI.

There is a strong case to support Dr Y V Reddy's thesis that for-profit MFIs should be regulated on par with moneylenders.Read full articleThe recent microfinance crisis in Andhra Pradesh has laid bare a fundamental mismatch between instruments and objectives. Directed credit such as microfinance or its broader counterpart called the priority-sector lending is economically justified only if the beneficiary entities use it to finance projects that are profitable at the market rate of interest but go unfounded by the market. When this condition is satisfied, on average, we would observe the same default rates on directed credit as on market-driven credit. But the high rates of default and repeated loan waivers point to the failure of microcredit to satisfy this condition. Indeed, prima facie, the availability of profitable projects in rural Andhra Pradesh at the market interest rate on a scale commensurate with the current volume of microcredit lending would seem to be highly improbable. A plausible conclusion is that at least in rural areas the principal aim of microcredit is not to correct a market failure in the…

Unless we find creative ways to massively increase investment in higher education, India's potential demographic dividend may fail to translate into a real dividend.Read full article While the university system in England is far from broken, in the last several decades, the more dynamic and competitive US universities have relegated it to the second position worldwide. Abandoning the traditional destinations in England, 100,000 Indian students today study in American universities. Aware of the decline, the British authorities have been reforming the system in the last 15 years. The latest step in this direction is the report of the independent panel headed by Lord Browne. The panel was asked to make recommendations to increase investment in education, ensure that the quality of teaching is world class and make higher education accessible to anyone with the talent for it. While the ailments of our higher education system are wider and deeper than those of the British system, there are useful lessons for us in the Browne report.