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

Articles By Kaushik Basu

Understanding Inflation and Controlling It

Inflation management is one of the hardest tasks an economic policymaker has to undertake. It would appear at first sight that one can rely entirely on common sense to carry it out. But that would be a mistaken notion. While inflation policy does require judgment and intuition, it is essential that these be backed up with statistical information and an understanding of economic theory. This paper tries to bring together the formal analytics that underlie inflation policy. It surveys some of the standard ideas and also questions some of them and, in the process, tries to push outwards the frontiers of our understanding.

India's Foodgrain Policy: An Economic Theory Perspective

The simultaneous occurrence of high food inflation and large foodgrain stocks in our granaries has been a matter of concern. The aim of this paper is to understand the fundamentals of our foodgrain market and policy that lead to this situation and to suggest policies for rectifying this. The central argument of the paper is that it is imperative that we look at the entire system of food production, food procurement and the release and distribution of food. Trying to correct one segment of this complicated system is likely to end in failure. The paper argues that there are two different motives for foodgrain procurement by the state - to provide food security to the vulnerable and to even out foodgrain price fluctuations from one year to another. Further, how we procure the food has an impact on how we release the food, and vice versa. Inspired by the sight of foodgrain going waste, it is often made out to be that our central problem is that of poor foodgrain storage. This paper disagrees with this popular view. While we no doubt should improve our storage facilities, it is important to be clear that this in itself will not lower the price of food. To achieve that we need to redesign the mechanics of how we acquire and release food on the market.

China and India: Idiosyncratic Paths to High Growth

If the Chinese economy had failed, mainstream economics would have described this as completely predictable, given the extent and nature of involvement of the Chinese state in the functioning of markets and the economy. The fact that China has succeeded therefore should lead us to question our textbook doctrines of development. Much of this paper is presented as a comparative study of India, China and, briefly, other Asian nations. It is shown that the mainsprings of development in these nations are widely different, even though their trajectories of growth are converging. The paper argues that social and political priming plays a major role in determining which economic policies will work. In the case of China, while the liberalisation from 1978 onwards was important, the social preconditioning achieved during the high-noon of the Maoist period, up to 1978, was no less significant. In judging the sustainability of growth in Asia it is essential to keep these social and political factors in mind.

India's Dilemmas: The Political Economy of Policymaking in a Globalised World

The performance of the Indian economy, as measured by the growth rate of aggregate income, has been remarkable, both in terms of past performance and in comparison to other nations. Among the several factors behind this, two which stand out are the economic reforms of the early 1990s and the sharp increase in the savings rate following bank nationalisation in 1969. This outstanding aggregate growth, however, comes with growing inequality and (declining but still) unacceptably high poverty. It is argued that this is partly a consequence of globalisation and gives rise to novel policy dilemmas. The need is for multi-country coordination of policies of a kind that has little precedence. India should use its improving global standing to initiate such an international effort.

Beyond Nandigram: Industrialisation in West Bengal

If we are to learn the right lessons from the tragedy of Nandigram, then we must ensure that the government is involved in the land acquisition process and that we correctly deal with three sets of issues: the size and form of compensation, the eligibility for compensation and the credibility of the process.