IAS General Studies: The Economic Time – July 2007

123 deal: A staggering achievement by Bodhisatva Ganguli

The 123 agreement, better known as the India-US nuclear deal, is indisputably Dr Manmohan Singh’s finest achievement as PM. The supremely modest PM will doubtless describe it as a collective achievement but there’s little doubt that the ending of India’s nuclear isolation has been personally driven by Dr Singh. It is not, of course, a done deal. A section of India’s ‘strategic community’ will continue to unearth infractions of India’s sovereignty.

No policy to build new towns by T K Arun, TNN

The rupee, it’s now settled, can only strengthen against the dollar. What can the government do to help industry in this situation? One thing that is entirely in the government’s hand to do is to bring down the cost of one vital factor of production — land. It will call for a major policy change, to remove the present artificial scarcity of urban land that is driving up real estate prices to ridiculous levels.

Trust foreigners over Indians by Swaminathan S Anklesaria Aiyar

July 2 marked the tenth anniversary of the Asian financial crisis, which flattened most Asian economies in 1997-99. China and India suffered, but survived intact. Today, Asian countries have adopted new policies — discussed below — to ensure that 1997 never happens again. Some of these new policies are wise, others are unwarranted overreactions.

The $23 bn black box in India‘s BoP by Swaminathan S Anklesaria Aiyar

In February, The Economist (the British weekly) hazarded a guess that India‘s current account deficit in 2006-07 would be 3% of GDP. Others, including me, felt it would be closer to 2% of GDP. In fact, it was just 1.1% of GDP, according to the latest RBI data. This explains why the net dollar inflow has been much higher than anticipated, driving up the rupee.

For a viable microfinance model by Raj Rishi Singal

The Reserve Bank of India has, over the years, devoted considerable time and energy to ensure widespread availability of financial services. This, by no means, is an easy task, given the geographical, economic and social constraints that come gift-wrapped with the package known as India. Along the way, the RBI developed some parallel systems outside the formal banking system to achieve this objective; but, at the same time, the market also developed some of its own solutions and delivery mechanisms. The RBI has enlisted their help as well but its suspicious nature is stunting their growth.

Reservations & participatory growth by Manoj Pant,

In this column last month (ET, June 15) one had argued that growth is a political problem particularly when it ceases to be participatory. The million dollar question, of course, is what makes it participatory? The crucial determinant is the ability of individuals to be a part of the growth process. But what determines this ability?

Forget SEZs, go for contract farming by Rajrishi Singhal

In the Far East it’s called saving one’s face. The government could look at some of the more popular, or more effective ways of wriggling out of this mess and yet not end up with egg all over its face. Caught in the crossfire of two competing failures, the government desperately needs an alternative solution that meets the competing aspirations of all the parties involved. And, that middle ground solution seems to be a term called contract farming.

What’s needed is entitlements by Manoj Pant,

Economics graduates have for long studied the conflict between growth and equity. They have learnt that very often choosing high growth may lead to some sacrifice on the equity front. The prime minister too in his recent speech reiterated this undergraduate message while commenting on two other issues — ‘conspicuous consumption’ and ‘excessive salaries’.

The decline of the dollar by M K VENU

Human psychology works in fascinating ways when responding to deeper shifts in market trends. Investors and market players in general prefer stability and status quo. Whenever there are signs of seminal, long-term trends emerging in the market, investors prefer to be in the denial mode for a while before accepting that the mother of all big tides may indeed be around the corner. This is truly exemplified by our current response to the US dollar.

Rising rupee, capital flows & growth by M K VENU

The Reserve Bank of India (RBI) has come in for some criticism for the way it managed liquidity in recent months to fight inflation. The criticism was plain and simple: the RBI had publicly proclaimed it was tightening liquidity, and sucking it out through successive repo rate increases and hikes in cash reserve ratios. But, in fact, there was net addition to liquidity, of several hundred billion rupees, from November 2006 to March 2007.

From Hindu to Sardar rate of growth by Mythili BhusnurmathHave

we, have we not, moved to a new growth trajectory? The latest numbers released by the Central Statistical Organisation (CSO) last Thursday would seem to settle that debate.

At 9.4% GDP growth in 2006-07 and an average of 8.7% in the last four years, the Indian economy’s performance is well above the Hindu rate of growth of the 1960s and the neo-Hindu rate of the 1990s. But is this higher growth rate, call it the Sardar rate of growth if you will, sustainable? The answer, in large part, depends on whether it is a cyclical phenomenon or the consequence of structural change; on whether it’s consumption or investment-led.

Courtesy : The Economic Times

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