Economic Times ⁽²¹⁸⁾

Economic Times October 29 2007 The debate on whether or not liberalisation helped reduce poverty is now essentially over. Sustained reduction in the proportion of the population living below the poverty line (or the poverty ratio) since the early 1980s stands in sharp contrast to no reduction in this poverty measure between 1950 and 1980. Unsurprisingly, the reform critics have changed the topic. They now say that reforms are to be resisted because they give rise to vast inequalities. Before we consider the empirical basis of this argument, let me note that in evaluating the desirability of the reforms, a clear distinction between poverty and inequality must be made. An increase in inequality is more acceptable if it is accompanied by poverty reduction. By the same token, policies that hold the line on inequality but deny the poor the opportunities to improve their lot are to be discarded. When measured against this criterion, liberal policies have delivered a vastly superior outcome than the dirigist policies of the 1960s and 1970s. Indeed, if we look at the measures of inequality across…

The Left & the UPA itself is responsible for the slowdown in reforms. Read full article Abstract: When reforms slow down, two explanations are commonly given: lack of consensus and vested interests. While these are powerful and plausible explanations, they also raise a curious puzzle: why do we observe periods of mega reform punctuated by long spells of inaction? Surely neither consensus nor vested interests can shift dramatically within a short period to produce the wide swings in the pace of reforms. Thus, recall that as the 1980s drew to a close, the spurt in reforms during 1985-86 and 1986-87 under Prime Minister Rajiv Gandhi seemed to peter out. Yet, in 1991-92, Prime Minister Narasimha Rao and finance minister Manmohan Singh began to lay down the foundation of systematic reforms. They did away with investment licensing as also with import licensing on capital goods and raw materials, substantially lowered industrial tariffs, opened most industries to foreign investment, dramatically reformed both direct and indirect taxes, substantially cut fiscal deficit, considerably liberalised the financial sector, and made the rupee convertible on the…

Intellectuals in India have been debating how to turn Mumbai into a global financial centre by 2020. But this ambition is hollow if we cannot turn Mumbai into a global city. Read full article At Rs 22,000 to Rs 40,000 per square foot, land prices at Nariman Point in Mumbai are comparable to those at Park Avenue in Midtown Manhattan. Even correcting for a speculative bubble, these prices are abnormally high for a city located in a low-income developing country. Land prices in Singapore and Shanghai are much lower. High land prices are but one manifestation of a highly distorted land market. Other, less dramatic but far more painful manifestations are to be found in the hardships the residents of Mumbai endure every day: rundown yet scarce housing, shrinking office space, long and arduous commutes, extreme shortage of schools and hospitals, poor water and sanitation facilities, and high cost of personal and domestic services.

Read full article Abstract: Two propositions have occupied the policy space in India recently: first, 10% growth in the GDP is possible but only if agriculture grows at the rate of 4% and, second, the acceleration in agriculture is essential to make growth more inclusive. Most Indians view growth in agriculture instinctively important and therefore accept these propositions at face value. But since their acceptance has important implications for which policies get adopted and which ones get short shrift, hard-nosed economists like to examine them more critically. Such examination leads to a more nuanced view of what place we must assign agriculture in the overall development strategy and what else must be done to accelerate poverty reduction. While many may find this unsettling, the hard reality is that agriculture has become virtually irrelevant to the overall GDP growth in India. Faster growth in industry and services than in agriculture over the last several decades has reduced the share of core agriculture in the GDP to only 16%. Therefore, even 4% growth in this sector can contribute only 0.64 percentage points…

Read full article Abstract: Dear chief minister, Kindly accept my belated congratulations on your spectacular victory in UP, by far the largest state in India and larger than all but six countries in the world. Allow me to also applaud you for publicly announcing your preference for poverty-based rather than caste-based reservations. Just as it took Richard Nixon — a Republican President — to open the door to China, it will probably take a Dalit prime minister to replace caste-based by poverty-based reservation in India. But in the meantime, you confront the task of leading UP out of poverty. Your speeches, including some delivered in my part of the world, leave little doubt that you fully understand what must be done. Yet, given the historic opportunity you have, I can scarcely resist offering my two bits’ worth.