In The Media ⁽⁴⁰⁰⁾

While interest rates have declined dramatically recently, private investment has remained stagnant. Why and how do we get out of this trap? Economic Times February 25, 2004 While interest rates have declined dramatically recently, private investment has remained stagnant. Why and how do we get out of this trap? This is a somewhat technical question but can be understood with a little patience. The starting point for the answer is the powerful savings-investment identity, which says that investment in an economy equals the savings available to it. In an open economy, there are three sources of savings: private, government and foreign. Likewise, there are two broad categories of investment: private and government. Measuring all variables as a proportion of GDP and denoting government and private investments by Ig and Ip and government, private and foreign savings by Sg, Sp and Sf, respectively, the identity can be written as Ig + Ip = Sg + Sp + Sf. Government investment includes investment in infrastructure, health and education. Private investment refers to investment in plant, machinery and buildings by firms. Private savings…

India is moving aggressively toward signing FTAs. Is this the right road? (Abstract or full text unavailable)

Distinguished economists Bradford DeLong of the University of California , Berkeley and Dani Rodrik of Harvard University separately argue that reforms cannot be credited with India ’s high growth rates in recent years because the shift in the growth rate preceded the reforms of the 1990s. In a related but slightly different vein, economist Joseph Stiglitz contends that India is one of the two most impressive economies today (the other being China ) and that India also, like China , has bought the least into the globalisation story that the IMF and others are selling. Are these right claims?The question “have the reforms failed India” at a time when optimism in the country is at its peak seems out of context if not outright silly. Yet, this is precisely the challenge reforms-skeptics have posed recently. Read full article The question "have the reforms failed India" at a time when optimism in the country is at its peak seems out of context if not outright silly. Yet, this is precisely the challenge reforms-skeptics have posed recently. For instance, distinguished economists Bradford DeLong of…

Sir, The article by Horst Kohler of the International Monetary Fund and James Wolfensohn of the World Bank in support of the multilateral trading system and the Doha round is welcome, especially as it belatedly repairs important sins of commission and of omission by these Bretton Woods institutions ("We can trade up to a better world", December 12). (Letter with Jagdish Bhagwati) (FT December 24, 2003) Sir, The article by Horst Kohler of the International Monetary Fund and James Wolfensohn of the World Bank in support of the multilateral trading system and the Doha round is welcome, especially as it belatedly repairs important sins of commission and of omission by these Bretton Woods institutions ("We can trade up to a better world", December 12). The sins of commission were different for the two institutions. The IMF's was indirect. Having encouraged the hasty adoption of capital account convertibility in the developing countries, the IMF played a role in the creation of the Asian financial crisis, while compounding it through mistaken conditionality in the year thereafter. The enthusiasm for trade liberalisation was…

Can the lower interest rates, favorable demographic transition and home-grown multinationals really deliver the Indian miracle? Happy dreams... Economic Times, November 19, 2003 There is a sudden optimism bordering on euphoria that India is poised to match, even beat the Chinese miracle. Pundits are betting that the decline in the interest rates, the expected rise in the proportion of the young in the total population, and the existence of homegrown multinationals guarantee a rapid transformation of India into a modern economy. Is this healthy optimism or wishful thinking? I have argued for some time now that a double-digit growth rate necessary to achieve the rapid transformation is well within India ’s reach. Yet, without some key reforms on which we have been dragging our feet for some time, such transformation is a pipedream. Rapid transformation requires massive movement of the labour force out of agriculture, which requires a double-digit growth of traditional industry, and hence reforms. Today, 65% of India ’s labour force is in agriculture in comparison to China ’s 25%. Industrial output in India accounts for 27% of GDP…