ET2001 (14)

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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 Institute. Economic Times, September 26 2001 “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 Institute. The conclusion itself is not exceptional since many others, including the present author (Economic Times, January 12, 2000), have argued for some time that a double-digit growth is well within India’s grasp. Indeed, Prime Minister Atal Bihari Vajpayee himself has mentioned 9 percent annual growth as necessary to double the country’s per-capita income in the next ten years. What is exceptional about the report is the set of reforms it regards crucial to attaining the 10 percent growth rate and, even more importantly, the reforms it regards as not so crucial. The report identifies three…

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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. Economic Times, August 25, 2001 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. But consider first the reasons why the hard-line position taken by India is not without justification. First, the origins of the skepticism on the part of India and several other developing countries can be traced back to the Uruguay Round (UR). Few developing countries had anticipated that Punta del Este Mandate, which launched…

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Savouring a Decade of Reforms

This month marks the end of the first decade of India’s economic reforms. What have we accomplished? 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. Economic Times, July 18 2001 THIS month marks the end of the first decade of India’s economic reforms. What have we accomplished? During the last two years, I have written critically about the pace and content of the reforms. But today is different: in this feel-good piece, I wish to demonstrate that the focus on incremental reforms in individual years results in an understatement of the totality of our achievements. The analogy is with the hour hand of the clock, which looks completely static, and yet completes a full circle every twelve hours. Begin by recalling the industrial policy prevailing prior to the launching of the reforms. The heavy industry was a state monopoly. Other industry was either subject to strict industrial licensing or reserved for the small-scale sector. The tight control of the government on the industry…

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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? Economic Times, June 20 2001 Singapore and Hong Kong have been the most open economies in the world during the past fifty years. While the former went through a brief import-substitution period during 1960s, the latter has been entirely free of trade barriers throughout this period. How do we explain this success of the two economies during a period when all other developing countries found themselves resorting to protection? The commonest answer to this question is that the domestic market in Singapore and Hong Kong was too small. Reliance on exports was a natural response to this small size of the internal market. Though plausible sounding, the late economist Bela Balassa correctly argued that it fails to stand closer scrutiny. Balassa reminded that with a population of 2 million in 1950 and relatively high per capita income derived from trading…

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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)? Economic Times, May 23 2001 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)? At first blush, the answer would seem to be “no”. By early 1980s, when PRC began to open its economy to foreign investors, the Chinese Diaspora in Hong Kong and Taipei, China was already among the most successful exporters of labour-intensive manufactures in the world. The Indian Diaspora lacks this expertise. Nevertheless, it is easy to underestimate the potential of the Indian Diaspora. Thus, focusing exclusively on the Indians living in the United States, consider a few salient facts. Based on median income, Indian-born residents in the United States comprise the highest-paid group in the country. They are represented in virtually all professions including agriculture, biotechnology, business, economics, finance, information technology, journalism, management, medicine and various sciences. As a visit to…

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