ET2001 ⁽¹⁴⁾

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. Economic Times, April 25 2001 IN THE 1950s, India and South Korea had approximately similar levels of per capita incomes. In the following two decades, Korea grew at rates far exceeding those of India, achieving a much higher per capita income level than the latter. During the same decades, Singapore, Taiwan and Hong Kong grew at rates even higher than that of Korea. Precise source of the success of these countries, sometimes called the Asian tigers, has been a subject of considerable controversy among scholars. At least three alternative views have emerged. Jagdish Bhagwati, Anne Krueger, Ian Little, T N Srinivasan and late Bela Balassa have taken the view that outward orientation and pro-market policies were the primary forces behind the stellar performance of these economies. These authors generally downplay the role of interventionist policies and argue that…

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. Economic Times, March 28, 2001 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. Under the University Grants Commission (UGC) Act, 1956, an institution can award degrees only if it is established under an act of Parliament or a State Legislature, or specially empowered to award degrees through legislation, or deemed to be a university by the Commission. Accordingly, the institutions of higher learning fall into four categories: (i) universities established by an Act of Parliament or State Legislature; (ii) degree-awarding institutions of national importance, such as the Indian Institutes of Technology (IIT), which are established under Acts of Parliament; (iii) institutions “deemed” to be universities, which are given university status under a provision in the UGC Act; and (iv) diploma-awarding institutions such as the Indian Institutes of Management that are neither established by…

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. Economic Times, February 28, 2001 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. In absolute terms, the subsidy amounted to a whopping Rs 13,200 crore in 1999-2000. There is little economic justification for placing this huge burden on the Indian taxpayer. Not surprisingly, even the Prime Minister’s Economic Advisory Council advocates an end to the subsidy in a report available on his website. The bulk of the fertiliser subsidy rewards the gross inefficiency of our urea manufacturers. According to the second report of the Expenditure Reforms Commission, issued on September 20, 2000, production costs of urea vary from Rs 4,800 per tonne for the most efficient plant to Rs 15,175 per tonne for the least efficient one. In today’s highly competitive environment in which paper-thin margins in costs are sufficient to drive firms out of business in most…

The major new stimulus to growth must come from further freeing up of the Old Economy, which lags behind the unfettered New Economy. Economic Times, January 31 2001 Speaking to the U.S. Congress during his recent visit to the United States, Prime Minister Vajpayee noted, “In the last ten years, we have grown at 6.5 per cent per year: that puts India among the ten fastest growing economies of the world.” He boldly went on to add, “We are determined to sustain the momentum of our economy: our aim is to double our per capita income in ten years -- and that means we must grow at 9 per cent a year.” Vajpayee is to be applauded for setting ambitious goals for the nation he leads. After all, no general ever won a war without being ambitious. The bad news, however, is that the Prime Minister’s resolve is about to be tested. Finance Minister Yashwant Sinha must soon present the second budget of the present government. If he fails to announce bold new initiatives, the Prime Minister better shelve his…