In The Media ⁽⁴⁰⁰⁾

Recently, the Finance Minister said the investment boom was leading to large trade deficit and he wants to cure it by opening the floodgates of foreign investment. But the minister got it exactly wrong: if increased foreign investment is to finance the domestic investment, the current account deficit MUST rise! It is simply a matter of understanding the savings-investment and balance-of-payments identities.Raising investment without lowering fiscal deficit is not sustainable in the long run unless we get lucky and households decide to increase their savings in a big way. Read full article A common misconception among policy makers and analysts is that trade deficit can be cured by increased foreign investment. According to one report, even the finance minister seems to have suggested this prescription for India’s rising trade deficit (‘FM to open FDI floodgates to keep trade deficit in check,’ ET May 23, 2005). Interestingly, however, the correct relationship is just the other way around: an increase in foreign investment increases trade deficit. (‘FM to open FDI floodgates to keep trade deficit in check,’ ET May 23, 2005). Interestingly, however, the…

The combined fiscal deficit of the centre and the states in India has been running at around 10% of the GDP since 1999. India has also accumulated a large public debt that stands between 80 and 85% of the GDP currently. These facts have led many to suggest that India may be heading towards another macroeconomic crisis. Economic Times Wednesday, 18 May 2005 The combined fiscal deficit of the centre and the states in India has been running at around 10% of the GDP since 1999. India has also accumulated a large public debt that stands between 80 and 85% of the GDP currently. These facts have led many to suggest that India may be heading towards another macroeconomic crisis. Fiscal deficit is said to exist when the total expenditures of the government exceed its total revenues. Just like the households living beyond their means, the government must borrow to bridge the gap between its expenditures and revenues. The borrowing adds to the debt. If the borrowing is from domestic sources, it contributes to the 'internal' debt and if it…

The case for an India-China FTA is based principally on its strategic value. During the last decade, with the creation of the NAFTA, several expansions of the EU and a host of smaller FTAs in Latin America, Asia has suffered from a diversion of these regions' trade away from it. One response to this trade diversion for Asia would be to move towards a bloc of its own. Such a bloc may give Asia the necessary leverage to pry open the NAFTA and EU blocs to outsiders through multilateral liberalization. Economic Times April 20, 2005 India-China trade is among the fastest growing bilateral trade relationships in the world currently. According to the Indian Commerce Ministry data, India's exports to China rose from a paltry $18 million in 1990-91 to approximately $3 billion in 2003-04. India's imports from China expanded equally rapidly, from $35 million to $4 billion over the same period. So rapid has this expansion been that from an insignificant supplier until the beginning of the 1990s, China has now come to replace the United States as India's top…

(Full text and external link unavailable) The gains from specialization exist in agriculture, too. Just as the countries that liberalized in manufactures benefited those that liberalize agriculture will benefit as well.

Where does India stand in the global trading system after ten years of the existence of the WTO? The report card is at best mixed. Read full article When India signed the Geneva framework accord to move the Doha negotiations forward last summer, Union commerce minister Kamal Nath was not denounced by the domestic or foreign press for his negativism, as had been the case with his predecessor Murasoli Maran in 2001, immediately following the launch of the Doha Round. On the contrary, none other than his cabinet colleague Sharad Pawar accused Nath of a "sellout". This, no doubt, is progress: Indian leadership is slowly but surely shedding its defensive posture and emerging as a more confident participant to the WTO negotiations. Even as India was moving from near autarky in the mid-1980s to an open trading system, its trading partners and the Western press were branding it as "obstructionist" in the global trade talks. No doubt, in part this vilification was the result of the independent stand India took in the successive rounds of negotiations, in contrast to its…