ET2020 ⁽⁷⁾

Economic Times, September 10 2020 The strict lockdown forced by Coronavirus during the bulk of the first quarter of fiscal year 2020-21 has translated in a sharp decline in the Gross Domestic Product (GDP). The latest estimates place year-on-year decline in GDP during April-June quarter at 23.9%. What this means is that if the economy were to shrink by this same percentage in the remaining three quarters, growth rate in 2020-21 would turn out to be -23.9%. Of course, no one is making such a dire prediction. C. Rangarajan, a former RBI Governor, has even written arguing that we cannot rule out the possibility of a small positive growth during the full year. Some commentators have tried to connect this decline to the steady decline in the quarterly growth rate from a robust 8.2% in the fourth quarter of 2017-18 to 3.1% in the fourth quartier of 2019-20. The argument these commentators seem to be making is that the large decline in April-June quarter represents fundamental weakness of the economy rather than the onslaught of Coronavirus. In my view, this…

Economic Times, August 16 2020 Since the second United Progressive Alliance (UPA) government, India has come a long way on the road to reforms. Insolvency and Bankruptcy Act (IBC), Goods and Services Tax (GST), Direct benefit Transfers (DBT), National Medical Commission (NMC) Act, Ayushman Bharat, slashing of corporate profit tax, commercial mining in coal and agricultural marketing reforms are some key examples. The pipeline of reforms to come includes such major measures as the National Higher Education Commission Act, public enterprise policy, and electricity reforms. Sadly, however, the scope of benefits of these reforms is being considerably limited by our policy mistakes in one important area: international trade. Here we are deviating from the road of steady liberalization that we had adopted in 1991. We traveled on this road till 2007, stopped, and have now taken a U-turn to begin traveling in the reverse direction. I have no doubt that eventually India will transform itself into a modern urban industrial economy. The critical question is whether we want to do it in 100 years or more as nearly all western…

Economic Times, July 9 2020 I came to Princeton University to do a Ph.D. in Economics in the academic year 1974/75. Princeton offered me full fellowship consisting of tuition and a stipend to defray the cost of basic necessities of life. Many of my American classmates—no less talented—paid their own way. At the personal level, I have always felt that this was an act of great generosity by Princeton and America. They not only recognized my talent but also provided funds to help me realize my potential. Nevertheless, as I began to understand America better, I also realized that America and American universities nurtured talented students from around the world in their enlightened self-interest. It is these students and world-class faculty that make U.S. universities great. They pick the best students and faculty wherever they exist. That does huge good to America and, indeed, the world by accelerating the process of research and innovation. Today, in addition to these difficult-to-measure benefits, foreign students also confer sizeable tangible benefits on the U.S. economy. In the academic year 1974/75 when I came…

Economic Times, June 7 2020 (With Geeta Gandhi Kingdon) India’s public elementary schools are in deep crisis. Begin with enrolments. Nationally, the number of these schools has remained approximately unchanged between 2010-11 and 2017-18. But the number of students has declined from 126.2 million to 102.3 million. That is a reduction of 23.9 million students. The result: the average enrolment has fallen from 122 to just 99 pupils per school over the seven-year period. Compare these changes to those in recognized private schools. Nationally, the number of private elementary schools rose by 122,600 and their number of students by 21.2 million between 2010-11 and 2017-18. The average enrolment fell from 202 pupils per school to 191 but remained almost double of that in public schools. By itself, this pattern is hardly worthy of the label “crisis.” For it represents the familiar phenomenon of a shift away from public to private schools. The real crisis is uncovered when we disaggregate enrolments by school size defined in terms of number of students per school. As students have shifted to private schools over…

Economic Times, May 14 2020 Even from the limited details that the Prime Minister spelt out in his speech on the 20 trillion-rupee stimulus package, it was clear that this headline figure would be reached by adding apples and oranges. The details now provided by the Finance Minister make this explicit. Not all of 20 trillion rupees constitute extra fiscal expenditure. They include extra expenditures, loans, loan guarantees and other forms of commitments by the government and the Reserve Bank of India. This is just as well. Medium to long-term impact of adding 10 percentage points to fiscal deficit would not have been pretty. The government would have had to print massive sums of money raising cash in circulation by a very large percentage, perhaps as much as 25 to 30%. How much impact the package will have on fiscal deficit is anybody’s guess. There are far too many unknowns: we do not know yet the extent of fall out from Covid-19 on tax revenues as well as the rejig of the originally budgeted expenditures. Surely, many of the budgeted…