Prime Minister Vajpayee’s China visit brought to the fore the inevitable comparisons between the economic performance of both nations. In some ways, this obsession with China over the years has become an important driver of change in India. In some quarters, the success of China is portrayed as evidence of the comparative advantage of authoritarian regimes over struggling democracies like India.

Now that Gujarat elections are out of the way, the nation can get back to the business of the more pressing, long-term, important issues of economic growth and alleviation of poverty. For several months now, our whole energy and attention were focused on the tragic event of Gujarat, and more specifically to the political fallout of the vicious battle for power. Happily, the doomsdayers were proved wrong. Gujarat people voted peacefully, and communal violence has not spread to the rest of India.

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.

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.

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.

Classical liberals (libertarians) are intelligent, articulate, freedom-loving people. Unlike the “bleeding heart” liberals of the US, libertarians hate big-government, and are particularly opposed to centralized state or bureaucratic control. In much of this opposition and love of liberty, they are right. The history of 20th century is the triumph of liberalism against fascist authoritarianism and collectivist totalitarianism. It is now axiomatic that the government which governs the least is the best government.

Reviewing the health care in the United States twenty-five years ago, the prestigious 'Daedalus' magazine coined the expression "Doing better, and feeling worse". That description certainly fits our economic scene.

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.

Once again, the budget season is upon us. For years budget speeches have been romantic exercises with grand gestures and sweeping policy announcements. Sadly, there were no fiscal or monetary incentives to promote desirable goals and pursue worthy policies. And without such incentives, and given the inertia of the political system, most grand gestures remained pious proclamations. The two recurring themes over the past 12 years of budgeting have been reduction of fiscal deficits and the health of capital markets.