ET2008 (12)

Transnational Terror: India’s Options

In the longer run the country’s most potent weapon against terrorism is going to be rapid economic growth and prosperity. Read full article In the 2000s, India has been the victim of at least four major attacks by Pakistan-based terrorists: the Parliament attack in 2001, explosions on Mumbai trains in 2006, embassy bombing in Kabul in 2008 and the recent Mumbai carnage. What can India do to protect itself against future attacks? In broad terms, there are two options: stop the terror at source and tighten security at home. Let us carefully examine each of these options. There are three immediate avenues to tackling the terror at source. First, India could go on a limited war with Pakistan. While this option may help India avenge the attacks it has suffered, it is unlikely to persuade Pakistan to dismantle the terrorist outfits. On the contrary, it is likely to increase public sympathy for the outfits, make future recruitment of terrorists easier and give Pakistani army an easy exit from fighting the Taliban alongside the US army.

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What Global Crisis Means for India

While India must eventually liberalise its financial sector, we must err on the side of caution.Read full articleWhile India must eventually liberalise its financial sector, we must err on the side of caution. Main Street reforms promise much better prospects of multiplying well-paid jobs for India's poor. The current economic crisis, which originated in the financial sector of the United States, is being transmitted to the countries around the world through three principal channels. First, it has directly impacted the balance sheets of financial institutions that invested in the mortgage-backed securities and their derivatives, which turned toxic following large-scale defaults in the US housing market. In Asia, Korean banks suffered the most, requiring a $130 billion bailout package. Second, the crisis has created a liquidity crunch. The US firms seeking liquid resources massively withdrew their investments in stocks and bonds in other countries. The resulting decline in the prices of bonds and stocks also led local investors to pull back from the market. Both factors contributed to the tightening of credit. Reinforcing these factors was the return of the local…

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Bollywood in the Post-reform Era

The success of reforms in stimulating growth has inclined the audience more favourably towards entrepreneurs and corporations.Read full articleThough the film industry rarely comes to mind when we think of reforms, its transformation in the post-reform era has been remarkable. Total revenues of the industry have grown from Rs 60 billion in 2004 to Rs 96 billion in 2007. This represents an annual growth of 17% in nominal terms. Today, India produces more films than either the US or EU. While Bollywood accounts for the bulk of the revenues, surprisingly, it produces only one-fifth of India's total. Tollywood (Telugu film industry) produces more films than Bollywood.To be sure, pre-reform policy regime proved lesser of a handicap for the film industry than for manufacturing. Being generally outside the ambit of the licence raj, the former could respond more freely to market forces than such sectors as automobile, cement and steel. Nevertheless, progress was hampered by super-high entertainment taxes that limited the growth of the market; import controls that denied the industry access to the state-of-the-art equipment; foreign exchange controls that limited…

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El Nano: A Perfect Storm

Arvind Panagariya: Although land acquisition for the Singur plant by West Bengal was well within the law, its approach was heavy handed and lacked transparency. Read full article Abstract: A set of weather events that individually give rise to only a mild to moderate storm turn deadly when they occur simultaneously. The result is what meteorologists call a "perfect" storm. The Singur tragedy is such a storm caused by confluence of an aggressive corporation, a zealous government and an opportunist politician. Until recently, it was a mystery why Tata Motors had chosen West Bengal, a state with a Marxist government, as the site for manufacturing Nano. Partial revelation of a tripartite agreement, signed by Tata Motors, West Bengal government and West Bengal Industrial Development Corporation (WBIDC) in March 2007, has now provided the explanation. Seeking to maximise profits, Tata Motors went on to pit the states of West Bengal, Uttarakhand and Himachal Pradesh against one another when choosing the production site for Nano. The ensuing competition produced the most lucrative deal for the corporation. The West Bengal government not only agreed to award…

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Closing the Doha Round

It’s a serious mistake for India to walk away from almost a done deal. India can accept a higher trigger and less generous SSM tariffs without compromising the interests of its farmers. Read full article Abstract: Pascal Lamy, the tireless director general of the World Trade Organisation (WTO), is in New Delhi trying to break the impasse in the Doha negotiations. New Delhi should oblige the visiting dignitary, not because its current negotiating position is without merit but because it can bring the negotiation to a conclusion without either diluting the overall benefits to India or compromising the interests of its farmers. The latest round of negotiations ending July 29, 2008 has brought the Doha agreement well within our grasp. So much progress was made during the first six days that by July 27 that only three key issues remained to be resolved: Special Safeguard Mechanism (SSM) in agriculture, special treatment for cotton, and sector-specific liberalisation initiatives in manufactures. Unfortunately, no further progress could be made in the following two days.

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