Democracy – a Source of Strength or Weakness?

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.

Big Picture and Attainable Goals

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.

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.

Is State Only a Necessary Evil?

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.

Doing Better, and Feeling Worse

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.

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.

Budget Blues: Hope Triumphing Over Experience

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.

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