Times of India ⁽⁹²⁾

Read full article and listen to the podcast here Abstract: AP: You’re listening to the “Transforming India” podcast, jointly brought to you by the Deepak and Neera Raj Center on Indian Economic Policies at Columbia University and the Times of India. I am Arvind Panagariya, Director of the Raj Center and Professor of Economics at Columbia. My co-host on this podcast is Professor Pravin Krishna. He is a professor of International Economics and Business at Johns Hopkins University. Welcome, Pravin. Listen to the Podcast here PK: Hi Arvind. Delighted to join you again for the seventh episode of this podcast as we continue to discuss Indian economic policies. AP: Yes, Pravin. And today we are joined by Naushad Forbes of Forbes Marshall. He is also the former president of the Confederation of Indian Industry and a prominent industrialist as well as a public intellectual in India. Welcome, Naushad. NF: Thank you. AP: So, Naushad, you and your company has been there in India for a very long time and you have been operating in the environment both before the liberalization in…

Read full article Abstract: The Reserve Bank of India has downgraded its forecast for growth in the current fiscal year to 5%. But going by the gloom that pervades our analysts and commentators, one would be tempted to think that the forecast is missing a minus sign in front of it. At such a time, a look at the post-reform economic history of India provides a good reality check. Since 1991, when systematic economic reforms were launched, the economy has oscillated between periods of high and low growth with the latter lasting two to three years. Each time it enters a low-growth phase, sceptics and pessimists of different shades come to the fore, predicting the end of the India growth story. Each time, the economy proves them wrong. Thus, alongside reforms, India had managed to register an average annual growth rate of 6.4% from 1992-93 to 1999-2000. This was the first time the country grew at a rate exceeding 6% for a continuous eight-year period. Even the 1997-98 East Asian currency crisis could halt the economy during this period for…

Read full article Abstract: Deep down, perhaps the most important factor that concerned Indian negotiators of the Regional Comprehensive Economic Partnership (RCEP) was the threat of competition from China. India has a large existing bilateral trade deficit with China and it was feared that opening to it under RCEP would widen this deficit yet further. A related concern was that an avalanche of new Chinese goods would hit Indian markets, undermining its manufacturing sector and Make in India programme. Examine first the issue of bilateral trade deficit. Setting politics aside for the moment, as long as a country’s trade in goods and services is balanced in aggregate, economic logic tells us that bilateral deficits and surpluses should not be a matter of concern. There are nearly 200 countries in the world and each of them strives to buy its imports from countries that charge it the lowest prices and sell its exports to countries that offer it the highest prices. It will be a wonder if these myriad transactions result in mutually balanced trade for each pair of countries. To understand the…

Read full article Abstract: In what is arguably one of the boldest reforms in the last 20 years, finance minister Nirmala Sitharaman has cut the effective tax rate on corporate profits from approximately 35% to 25.2% for existing domestic companies and 17% for new manufacturing companies established before October 31, 2023, provided the companies take no exemptions. For existing companies, the tax rate is now below or equal to those in Japan, South Korea, China, Indonesia and Bangladesh though higher than those in Taiwan, Thailand, Vietnam and Singapore. For new manufacturing companies, the tax rate equals that in Singapore but is below those in all other countries just named. By putting an end to exemptions, the government has greatly simplified the corporate profit tax system and thus eliminated numerous sources of bribes, harassment and tax disputes. Provided the government does not let exemptions slip back into the system, it would have limited future tax disputes to reporting of revenues and costs. Tax inspectors will no longer be able to harass enterprises and extract bribes from them by questioning the exemptions…

Read full article Every crisis is an opportunity, so goes the saying. For Indian industry, it is an opportunity to lobby for a handout from the government at taxpayer’s expense. The auto industry’s case shows how far our industry leaders can cash in on this opportunity. Multiple representatives of auto industry have pleaded for help on the ground that this sector accounts for 50% of all manufacturing and has declined by 30%. Now, the latest press note on GDP by MOSPI reports that manufacturing as a whole grew 0.6% in the first quarter of 2019-20. Simple arithmetic show that this means that manufacturing other than auto grew a fantastic 31.2% during the quarter. Wow! But let us give the auto industry some rope and accept that it is only human to exaggerate to attract attention in the midst of a crisis. Assume that the share of autos in manufacturing is not 50% but 30%, and that its sales fell not by 30% but 20%. Even then it follows that manufacturing other than auto grew a handsome 9.4% during the first…