In The Media ⁽⁴⁰⁰⁾

Read full article Abstract: The presidential address to Parliament on June 9, 2014 had focussed nearly exclusively on projects and schemes, eschewing policy. Therefore, many had eagerly awaited the budget speech for a policy vision of the new government. Unfortunately, it too left observers guessing on whether the government would tackle tough reforms or rely principally on better implementation. Had this been the budget of the United Progressive Alliance (UPA), arguably it could have passed as spelling directional shift. But coming as it does from a government that has just scored an unprecedented victory on the platform of growth, development and jobs, it feels incremental. Such is the ambiguity of the message that the outgoing finance minister P Chidambaram has gone on to claim, unjustifiably in my view, that this is his interim budget without the humour and inspirational quotes. The budget surely has features that sharply distinguish it from the Chidambaram budget. It offers steps to minimise future tax disputes and surprises. It contains credible proposals to accelerate building of infrastructure. It promises to develop entrepreneur-friendly legal bankruptcy framework…

In a country with nearly 500 million workers, no more than 10 million are employed in larger corporations. It should concern us all. Read full article Dear India Inc, You represent the most productive part of the Indian economy. Sectors in which you dominate, such as auto parts, automobiles, two-wheelers, chemicals, engineering machinery, petroleum refining, telecommunications, software and finance, produce more value per rupee of resources used than any other part of the economy. Yet, one fact sticks out like a sore thumb. You employ a minuscule part of India's workforce. About half of the workforce is in agriculture and the vast majority of the rest is self-employed or toils in low-wage informal sector jobs. That less than 10 million workers should hold good private sector jobs in a country with 500 million workers is a matter of national shame. Of course, I do not suggest for a moment that this is your fault. You are in business not to promote employment but to create wealth. You must chase revenues, not employment. I also appreciate that you must choose technology…

The author explains why his suggestion of the fiscal deficit at 4.5% of GDP differs from P Chidambaram's 4.1% in the interim Budget Read full article Abstract: A controversy was recently triggered when I told an interviewer that the fiscal deficit at 4.5 per cent of gross domestic product (GDP) in the fiscal year 2014-15 was within tolerance limits if accompanied by an increase in capital expenditure from 1.76 per cent of GDP in the interim Budget to two per cent. Former finance minister P Chidambaram reacted sharply to the suggestion, asking rhetorically, "Will the government follow the Kelkar-recommended path and affirm the Budget estimate fiscal deficit of 4.1 per cent for 2014-15 [as provided in his interim Budget]? Or will the government take the advice of Arvind Panagariya (wrong advice in my view) and allow the fiscal deficit to rise?" There are both political and economic responses to the objections aided by Mr Chidambaram. The political response is twofold. First, as R Jagannathan has already noted in a brilliant column, Mr Chidambaram himself is responsible for the original sin of deviating from the…

Read full article Abstract: The Planning Commission is being revamped. This should have happened at least 16 years ago when the first NDA government came into office in 1998. By that time the 1991 reforms were beginning to transform the nature of the Indian economy from being closed and centrally planned to an open and private sector-led economy. But better late than never. Prime Minister Narendra Modi announced this bold reform in his maiden Independence Day speech. He is now actively following up on this announcement and met selected experts yesterday. I hope the new institution will be a high-powered and knowledge-driven body that will win the respect of its peers by the value addition it brings to addressing India’s myriad challenges. Modi also used his Red Fort address to hold up a rather unflattering mirror to us Indians instead of trotting out a laundry list of new schemes. This was widely appreciated. He dwelt on aspects such as how we Indians don’t respect our women; lack basic civic sense and keep our cities and villages filthy; focus unremittingly on…

Read full article Abstract: In a recent article, i had argued that the new government could reform laws relating to subjects on the Concurrent List of the Constitution by empowering states to amend them. I had suggested that inserting — in each law to be reformed — a clause that empowers states to amend it could do the trick. A potential problem with this approach, however, is that the insertion of such a clause in the central law itself requires legislative action. And in so far as the new government lacks majority in the Rajya Sabha, this amendment becomes an uphill task. Two friends — one a senior policymaker and the other a policy analyst with three decades of experience in regulation — have suggested two alternative solutions to this problem. First, the Constitution empowers the president of India to permit states to amend central laws relating to subjects on the Concurrent List. Armed with such permission, state legislatures can pass amendments and turn them into laws applicable to their respective states. Presidential assent is an executive decision and does not require legislative action. The…