Public Good or Private Gain?

In our country the more things change, the more they remain the same! We have had interminable debates on the merits and demerits of public sector vs private sector for two decades now. Meanwhile global economy has changed beyond recognition. Most countries, which subscribed to state monopolies and government ownership altered their policies radically. USSR collapsed, and east Europe has been liberated. China is almost entirely market driven, and state is retreating from business functions rapidly. And yet, our Union cabinet dithers on disinvestments! Let us examine a few facts.

Life Imitating Art and Deja Vu

For observers of Indian political and public scene, life does seem to imitate art.  Just when you think things will settle down, and the nation will focus on the key goals, there is a new scandal or scam or sensation or drama. Like in a soap opera, week after week we are subjected to titillation, suspense and excitement, sans good sense or clear direction. This week’s theme is oil dealerships, and the nepotism and corruption associated with selections. Once again, legislators are up in arms, parliament is paralysed, grave statements have been issued, and speeches have been made.

Market Economy and Self-correcting Institutions

An efficient market economy needs effective and independent regulators, speedy justice and mechanisms to enact laws to protect the investors and citizens. These are the lessons we in India need to learn from the US response to the collapse of Enron. It soon became the world's largest electricity and natural gas trading company.

Regional Disparities Pose Danger to Unity

One of the great challenges confronting contemporary India is the growing regional disparities. Prof. Amaresh Bagchi and NJ Kurian point out that the percapita income (1996-99) of Maharashtra is Rs 19,248 and that of Bihar is Rs 5,465. This maximum / minimum ratio was 1.87 in 1960-63, 2.50 in 1970-73, 3.28 between 1987-90 and is now at 3.52. The high-income states of Goa, Maharashtra, Gujarat, Punjab and Haryana, with a population share of 20% account for 33.8% of NSDP. Their share of NSDP was 27.6% in 1970-71.

How Do We Desubsidize Painlessly

One of the recurring themes of Indian public expenditure and budget making in the last decade is the fiscal rigidities making it difficult for governments to change policies and priorities. In the Union budget, interest payments, defence expenditure, transfer of resources to States and wages are more or less inflexible, and there is no room for manoeuvering. It is now axiomatic that subsidies cannot be removed without incurring high political and social costs.

No Room for Cynicism and Despair

The new year brings little cheer to the long-suffering people. War clouds are hovering over our skies. Much of the economy is stagnant. The share of manufacturing sector as a proportion of GDP is in decline. Tax revenues are well below projections, and expenditure – mostly unproductive - continues to mount. Capital markets are jittery and investor confidence is low. Banks are flush with funds, and yet legitimate credit requirements of the surviving manufacturing enterprises are not met. But spurious companies get large loans for imaginary purposes.

Good governance is key to prosperity

The news on the economic front is somewhat disconcerting.  The last quarter growth rate has fallen to 3.8%.  What is worse, the revenues of Union government in the first quarter are   Rs.10, 000 crore below estimates and the fiscal deficit has risen significantly.  Two major credit rating agencies have down graded India’s creditworthiness. There are early days yet, and things could improve in the remaining fiscal year.  But news from manufacturing sector is not very happy either.  In fact, if services sector is excluded, there is stagnation in much of agriculture and industry.

Fiscal Crisis and Governance

Ballooning fiscal deficit is the major problem plaguing the minds of policy makers, economists and thinking citizens.  Shorn of all jargon, fiscal deficit is nothing but the excess of government expenditure over revenues. The finance ministers of the past effortlessly bridged this gap by resorting to two ‘simple’ measures – deficit financing or borrowing.

A Young India – Problem or Opportunity?

Some of you might have seen the recent media hype about the Goldman Sachs report, which projected India to become one of the 6 largest economies in the World along with Brazil, Russia and China by the year 2050. The report projects that among the current members of the G-6 only Japan and the US will remain in the top six by that time.