ET2017 ⁽⁵⁾

The Economic Times December 18, 2017 Read full articleIt has been asserted by leading figures in the recent election campaign whose results will be known today that the ‘Gujarat Model’ has enriched only the top 1% of the population, that it has helped only ‘five to ten’ industrialists, and that it has done nothing for Dalits and tribals. While debates during election campaigns are intensely political, and one must resist attaching excessive significance to what is said in the midst of them, these claims have far too important implications for our policy choice to be left unscrutinised. But first let me clarify what is meant by the ‘Gujarat Model’, at least to me. I had first used this term in juxtaposition to the ‘Kerala Model’ in the 2012 book, India’s Tryst With Destiny, jointly authored with my Columbia University colleague Professor Jagdish Bhagwati. As we later explained in an interview in this newspaper (‘Gujarat Promises Continued, Accelerated and All-Around Progress: Jagdish Bhagwati & Arvind Panagariya,’ June 20, 2013, goo.gl/B4vskd), “‘Kerala Model’ in our book is a metaphor for a primarily redistribution and State-driven…

Read full article October 23, 2017 The Times of India Republished on Economic Times There is general agreement that tepid growth in bank credit has been a major obstacle to launching the economy into a 8% plus growth trajectory. Bringing credit growth back on track in turn requires restoration of the health of Public Sector Banks (PSBs). Before I turn to the issue of how we might restore the health of PSBs, let us get the facts on the slowdown in credit growth right. Today, it is universally believed that the annual growth of credit advanced by the Scheduled Commercial Banks (SCBs) in 2016-17 fell to 5.1%, the lowest in six decades. This is the figure in a widely quoted April 2017 PTI story. The latest data in the Reserve Bank of India (RBI) Handbook on Statistics show, however, that SCB credit has actually grown 9% in 2016-17. This is far from the lowest in the past six decades. For example, at 5.7%, credit growth in 1993-94 was more than 3 percentage points lower. It deserves noting that the 9%…

October 8, 2017 The Economic Times Read full article Two contrasting episodes from recent economic history offer useful background against which to think about the appropriate policy response to the recent decline in the growth rate. The first relates to the NDA government, which first came to power in March 1998, and the second to the UPA government, which assumed office in May 2004. In my earlier writings, I have systematically documented the wide-ranging reforms that the government of Prime Minister Atal Bihari Vajpayee introduced between March 1998 and May 2004. During this government’s first two years, the real GDP at market prices grew at the average annual rate of 7.5%. But in the subsequent three years, the growth rate successively fell to 3.8%, 4.8% and 3.8%. In nine of the 12 quarters during these three years, growth fell below 5.5%, and in one quarter to just 1.1%. Right-Fisted Fisc Such slow growth would unnerve any government today. Yet, putting faith in its reforms, the Vajpayee government stayed course without succumbing to fiscal stimulus of any sort. On the contrary,…

While the government must be vigilant, it should avoid overreacting to critics. Any claims of weakness in the economy are so far unsupported by data.Read full article Reviewing the fascinating book Progress by Swedish economic historian Johan Norberg, the Economist recently wrote, “People are predisposed to think that things are worse than they are, and they overestimate the likelihood of calamity. This is because they rely not on data, but on how easy it is to recall an example. And bad things are more memorable.” These words aptly summarise the nature of the recent debate on growth in India. During 2014-15 to 2016-17, the real gross domestic product (GDP) at market prices grew 7.5% on average. This growth came on the heels of below-6% average growth during the last two years under the United Progressive Alliance (UPA) government. However, when the Central Statistics Office (CSO) first released its estimate of robust 7.4% growth in 2014-15, most commentators including many of our leading economists rejected it arguing that it did not match their own assessment of reality on the ground. The common refrain…

A concerted effort has been made to improve the ease of doing business at the level of the states. The government has repealed 1,175 redundant laws.Read full article After a pause of 10 years, economic reforms returned to the policy agenda in 2014. In the last three years, the Narendra Modi government has moved on nearly all fronts: macroeconomic stability, infrastructure, energy, corruption, direct and indirect taxes, foreign direct investment (FDI), closure of sick units, disinvestment, agriculture, urban development, cooperative federalism and social spending. Perhaps the most consequential reform since the new telecom policy launched by Prime Minister Atal Bihari Vajpayee has been the goods and services tax (GST). The reform replaces myriad indirect taxes, currently imposed by the Centre and states, by a single countrywide tax. It also ends the cascading of tax, whereby the current system imposes a tax on tax in many cases. The largest gain from the reform would come from the unification of fragmented localised and regional markets into a single national market for most products and services.