ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Arvind VirmaniSubscribe to Arvind Virmani

Natural Cities

Cities should be able to manage themselves and be self-sustaining, with a single energy input. This article presents the idea of natural cities.

IMF Reforms 2010: Do They Mirror Global Economic Realities?

The 2010 round of quota reforms at the International Monetary Fund did not adequately reflect the emerging global economic realities and this must be regarded as a missed opportunity to redress the gross imbalance that has prevailed for several decades. Several "positive" aspects of the reforms have been given high publicity, but they need to be assessed analytically. This paper addresses issues of governance reform at the IMF in the context of the emerging macroeconomic configurations.

The Global Crisis and Systemic Risks: Matching Sources with Correctives

Using the literature of pollution control and extending the idea of a Tobin tax, this essay argues that as far as unwanted excessive leverage by financial institutions is concerned, a leverage tax could be thought of. As far as complex financial products are concerned, the solution perhaps lies in transparency and a process of simplification of the products. In handling misrepresentation/fraud, regulatory oversight of products or establishment of effective customer protection agencies could be thought of.

Growth and Poverty: Policy Implications for Lagging States

This article shows that the interstate differences in poverty rates can be largely explained by differences in the per capita gross domestic product, agricultural growth and the share of the bottom 40 per cent of the population in consumption. To eliminate poverty, economic policy therefore has to accelerate growth, focus programmes on agriculture and rural development in the poorer states and target subsidies at the bottom 40 per cent. The most critical areas distinguishing state growth performance have been modern (registered) manufacturing and commerce.

World Economy, Geopolitics and Global Strategy

In the 21st century, all major countries recognise that international trade and financial flows are in the interests of both the source and destination countries. Therefore, there is a need to promote economic relations for mutual gain. This article documents the relative economic and geopolitical position of the major countries and outlines the new challenges facing the US, and, to a varying and perhaps lesser degree, the other major countries, including India. It also gives a projection of the world economy and polity over the first half of the 21st century which helps clarify the challenges and opportunities for the US and India, and the imperatives for mutually beneficial cooperation.

Institutions, Governance and Policy Reform

The literature on institutions and development has dealt with questions of grand design such as the Constitution, the rule of law (personal safety), property rights and informal rules embodied in culture. These are matters that happen on a time scale of a quarter/half century or more and can be thought of as the 'superstructure' of institutions. The quantitative work on institutions and growth has explored the linkage between these institutional issues and economic growth. The current paper focuses on what may be called the 'microstructure' of institutions, a smaller scale at which change can occur over a time frame of decades (or half decades). Among the issues that arise in this context are how changing institutions require changes in policies.

Customs Tariff Reform

This note argues that India?s tariff rates be brought down to globally competitive levels and proposes a uniform structure of tariffs. The reduction of duties will be accompanied by a real depreciation of the rupee relative to the exchange rate in the base line scenario (of no tariff reductions). This will substantially offset the direct effect of tariff reduction on industrial goods. The easy availability of inputs at low tariff rates and the pressure to improve productivity should take care of the remaining gap. No significant industrial product line is likely to go out of business, though intra-industry trade will increase even more rapidly.

Need for a Hybrid Proposal

Different answers about using foreign exchange for infrastructure development emerge depending on the way we define and restrict the question. But practical policy reform has to be based on the art of the possible, and a pragmatic package would adopt elements of different perspectives and present a hybrid proposal. These would include increasing public investment in infrastructure along with a sharp reduction in tariff rates, a pro-competition infrastructure policy, a professional and independent regulatory framework and institutional reform of public infrastructure monopolies.

Election 2004: A Different Explanation

Contrary to the assumptions of election analysts, the high growth rate of the last two quarters of 2003-04 may not have affected Indian voting behaviour. Secondly, the steady and perceptible deterioration in governance over the past four decades is closely linked to the anti-incumbency vote.

Competitive Access to Telecom

The Telecom Regulatory Authority of India's recommendations make effective de-licensing possible through a system for 'automatic licensing', subject to transparent published guidelines. Spectrum permits are, however, still strictly controlled by the spectrum advisor with no provision for trading. The regulatory authority needs to reconsider this issue.

India's External Reforms

The liberalisation of India's external sector during the past decade was extremely successful in meeting the BOP crisis of 1990 and putting the BOP on a sustainable path. These reforms improved the openness of the Indian economy vis-à-vis other emerging economies. Much, however, remains to be done. India's economy is still relatively closed compared to its 'peer competitors'. Further reduction of tariff protection and liberalisation of capital flows will enhance the efficiency of the economy and along with reform of domestic policies will stimulate investment and growth. The main lesson of the nineties is that liberalisation of the current and capital account increases the flexibility and resilience of the BOP. This applies to trade, invisibles, equity capital, MLT debt flows, and the exchange market. The author's analysis confirms that in India the exchange rate is a powerful instrument of adjustment in the current account deficit. It also confirms that equity outflows are very unlikely to be a major cause of BOP problems (unlike short-term debt). The impact of fiscal profligacy on the external account has become indirect and circuitous with the implementation of external sector reforms. It operates much more through the general expectations about economic (growth) prospects and the risk premium demanded by foreign (and domestic) investors and lenders. Thus its negative effects are likely to be focused on the domestic rather than the external account. In other words, the negative long-term effects of fiscal profligacy are more likely to be felt in future on the growth rate of the economy and the health of the domestic financial sector.

A New Development Paradigm

At the beginning of the 21st century there is the need for a new development paradigm that recognises that 'government failure' is a much more important problem than 'market failure'. 'Privatisation' of government services by its employees and government's monopoly of power are the real problems today. The new paradigm must be based on a clear and non-ideological recognition of the strengths and the weakness of the state and the people. A democratic society has enormous potential for entrepreneurship, innovation and creative development. The people, their diverse forms of activity and association such as companies, cooperatives, societies, trusts and other NGOs must be allowed and encouraged to play their due role. The state must focus on what only it can do best and shed all activities that the people can do as well or better. The heavy hand of government in the form of incentive-distorting laws, rules, regulations, procedures and red tape have also corrupted industry and business and other organised interest groups. These must be removed so as to release the energy of the people. The state should confine itself to managing the economy so as to accelerate employment and income growth in a self-sustaining manner, ensure that all citizens receive their basic entitlements of basic public goods and services and empower the poor so that they have equal rights (and responsibilities) with the better off citizens.

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