In The Media ⁽⁴⁰⁰⁾

The Indian economy performed better between 2003-04 and 2005-06 than during any other three-year period since Independence. Read full article The Indian economy performed better between 2003-04 and 2005-06 than during any other three-year period since Independence. During these three years, India's Gross Domestic Product (GDP)-a measure of the country's total income-has grown 45 per cent in dollar terms. Merchandise exports have doubled and services exports have trebled. The total number of vehicles produced during these three years exceeds the entire stock of registered vehicles in 1990-91. In telecommunications, India has gone from a total of five million telephone lines in 1991 to five million additional telephones every month. These developments have placed India among a handful of future economic powers. Discussions of success stories are now centred not on the East Asian tigers of yesteryear, but on India and China. And given the uncertainty surrounding the longrun stability of China's authoritarian regime, many place greater faith in the future of a democratic India. Will India overtake the Chinese dragon? Therefore, a burning question these days is whether India can…

Is the current growth in India we observe represent a business cycle effect or the country has shifted to a higher growth path? I argue that it is the latter.Without rapid expansion of the unskilled-labour-intensive industry, progress towards poverty reduction and transition to a modern economy will remain far slower than is feasible. Read full article Abstract: Real gross domestic product (GDP) at factor cost has grown 8.1% annually in the last three years (2003-04 to 2005-06). A key question is whether this rate represents a business cycle effect or fundamental shift in the trend growth rate. The accompanying chart helps explain the complexity of the issue. In the first three years of the 1990s, the GDP grew 4% annually. In the following four years, the growth rate jumped to 7.1% but only to fall back to 5.2% in the succeeding five years. Underlying these fluctuations, the trend growth rate was approximately 6%.

Professor Pranab Bardhan of the University of California at Berkeley has recently resurrected inequality as the key explanation for the impasse on the reforms (Financial Times, August 8, 2006). Is his claim right? At least as a general proposition, the link between inequality and the ability to implement reforms is highly tenuous.It is the collective action theory, pioneered by the late Professor Mancur Olson, rather than inequality that explains better the past reforms and current impasse. Read full article Abstract: Professor Pranab Bardhan of the University of California at Berkeley has recently resurrected inequality as the key explanation for the impasse on the reforms (Financial Times, August 8, 2006). He rightly argues that the recent claims of greater equality in India are in error since they compare the consumption inequality in India with income inequality in other countries. Because the rich save proportionately more than the poor, measures of consumption inequality are lower than of income inequality, biasing the comparisons in favour of India. For consistency, Prof Bardhan compares wealth inequality for which comparable cross-country data are available. For the year…

Tarapore Committee-II on capital account convertibility is due to table its report on July 31, 2006. Tarapore Committee-I, also appointed at the urging of Mr P Chidambaram during his first tenure as the finance minister, had recommended full convertibility within three years, ending 1999-2000 with specific goal posts adopted. The Asian financial crisis sealed the fate of that recommendation but the FM has once again revived the issue. We offer five reasons why India should not rush into convertibility.India should stay course on the reforms, including increasing the role of the private sector in the financial markets, without committing to a specific timetable for full rupee convertibility. Read full article Abstract: Tarapore Committee-II on capital account convertibility is due to table its report on July 31, 2006. Tarapore Committee-I, also appointed at the urging of Mr P Chidambaram during his first tenure as the finance minister, had recommended full convertibility within three years, ending 1999-2000 with specific goal posts adopted. The Asian financial crisis sealed the fate of that recommendation but the FM has once again revived the issue. We offer…

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