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

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Rags to Riches? Intergenerational Occupational Mobility in India

The paper examines intergenerational occupational mobility in India among males. This analysis differs from previous work in three important respects. First, a finer-grained categorisation that takes into account differences in skill levels across occupations as well as India’s social hierarchy of labour is used. Second, both large and moderate ascents and descents are examined. Third, the situation in India with mobility patterns at other times and in other countries is compared. The results show vast differences in the upward and downward mobility prospects of urban and rural residents and upper-caste Hindus versus Scheduled Castes and Scheduled Tribes. The findings also reveal that downward mobility risks loom large in India and that mobility patterns in India and China appear remarkably similar.

Some Puzzles about Firms

Despite the presence of a large number of manufacturing firms in the informal sector in India, we know very little about their characteristics and evolution over time. We present some puzzles about firms in the Indian informal manufacturing sector, using unit-level data from the National Sample Survey Office surveys of unorganised enterprises from 2000-01 to 2010-11. There is clear evidence of a positive relationship between worker wages and firm productivity, indicating the importance of improving firm productivity in the Indian informal sector as a means to improve the living standards of workers. Our analysis also shows that there are social and economic barriers to informal enterprises increasing their productivity, which is a matter of major policy concern. There are also gender-related differences in the productivity of firms. Targeted government programmes are needed to address the issues that socially disadvantaged groups and female entrepreneurs face in the informal manufacturing sector.

Where Have All the Workers Gone?

India's post-reform economic development has seen a sustained decline in the labour intensity of the organised manufacturing sector, including in labour-intensive industries. This paper argues that this occurred due to an increase in the real wage to rental price of capital ratio, which, in turn, was mostly due to a fall in the relative price of capital goods. The decrease was driven by trade reforms in capital goods, and falling import tariffs on capital goods. While a fall in the relative price of capital may have led to an increase in the rate of private fixed investment in machines, and consequently, economic growth, one inadvertent consequence of the trade reforms was that they disincentivised firms from hiring labour.

Boom and Bust?

India's post-reform growth experience can be separated into three distinct growth episodes. The first growth episode was from 1993 to 2002 and was characterised by a set of predictable informal relationships ("ordered deals") between political and economic elites, which were relatively open as well. The second episode was from 2002 to 2010, and deals in this period became increasingly closed, leading to negative feedback effects along with structural retrogression of the economy. The third episode, beginning in 2011, was one of an incipient growth deceleration, and was characterised by increasingly disordered deals. This paper argues that this deceleration is the outcome of two separate phenomena: (1) increasing political delegitimation of the growth process that was seen as highly predatory and corruption-intensive; and (2) the pushback from accountability institutions in the post-2010 period. For growth to return, more than economic reforms or infrastructure spending, it is necessary for a realignment of the relationships between political and economic elites and between elites and non-elites such that there is a return to "open ordered deals".

Was the Mandal Commission Right? Differences in Living Standards between Social Groups

Affirmative action has been at the heart of public policy towards the socially disadvantaged in India. Compensatory discrimination policies adopted for the scheduled castes and scheduled tribes since independence are now available to Other Backward Classes. This paper examines why the obcs have lower living standards, as measured by per capita household consumption expenditures, relative to the mainstream population, and whether these reasons are similar to those observed for scs and sts. It finds that while the causes of the gap in living standards for the obcs are broadly similar to those for the scs and sts, the role of educational attainment in explaining the gap is particularly important for the obcs.

Organised versus Unorganised Manufacturing Performance in the Post-Reform Period

This paper analyses the productivity performance of both the organised and unorganised segments of the Indian manufacturing sector using unit level data. Both partial and total factor productivity measures are employed. Our analysis reveals that labour productivity has increased for the organised sector over time, whereas both labour productivity and capital intensity growth have slowed down in the unorganised sector during the period between 2000-01 and 2004-05. The improvement in TFP growth in organised manufacturing in the post-2000 period as compared to the second half of the 1990s across most states in India is heartening as also the fact that output growth was mostly productivity-driven in the post-reform period. However, the declining TFP and the increasing capital intensity of the unorganised sector are causes of worry and raise several important questions.

Why Did the Elephant Start to Trot? India's Growth Acceleration Re-examined

It is commonly believed that India's growth acceleration has been mainly due to a change in the state's attitudes towards business in the early 1980s and not so much because of changes in economic policies. This paper re-examines this argument and shows, first, that the turnaround in growth took place earlier in the late 1970s. It also shows that growth has been mostly driven by the rate of private equipment investment (which increased in the mid-1970s), and that this in turn has been driven by financial deepening, public fixed investment and the relative price of equipment investment. The paper concludes that the effect of the attitudinal shift of the state towards the private sector on growth was of the second order, and if it did have an effect, it was through changes in economic policies, rather than independently of the latter.

On India's Poverty Puzzles and Statistics of Poverty

The greater availability of NSS data sets has prompted a flurry of studies on poverty in India generating much debate. Some of the controversy relates to issues to do with quality of data. This article surveys the debate on poverty and the key issues raised in the debate, discussing the construction of the original poverty lines. The authors present new evidence on the divergence between calorie-based poverty measure and the official poverty line, and explore alternative explanations for this divergence.

Political Budget Cycles in India

Political Budget Cycles in India Kunal Sen Rajendra R Vaidya Political Business Cycle Theories argue that opportunistic incumbent political parties attempt to manipulate policy instruments prior to elections in order to increase the probability of being re-elected. In this paper the authors test the empirical implications of these theories for the Indian economy. They find a distinct increase in both the budget deficit and in its monetisation in the years leading to an election. No evidence is found of an electoral cycle in output. While the aggregate price behaviour is found to be unaffected by elections, there is some evidence of a pre-election increase in the price of manufactured products.

Economic Reforms and Rate of Saving in India

Economic Reforms and Rate of Saving in India Premachandra Athukorala Kunal Sen This paper contributes to the current debate on the decline in the domestic saving rate in India in the aftermath of the liberalisation reforms initiated in 1991. It is found that the decline in the saving rate has predominantly originated in household physical saving, the main subcategory of saving which is common to both saving and investment estimates prepared by the CSO. Given that the persistent decline in household physical saving has occurred in a context where private corporate investment have exhibited strong growth and that there is no evidence of an intrinsic bias in the new policy regime against the unorganised sector, we suspect that the decline in the saving rate is a statistical artefact resulting from an underestimation of total gross domestic capital formation.

Move towards a Market Economy-Modern Austrian and Post-Keynesian Perspectives

Modern Austrian and Post-Keynesian Perspectives Kunal Sen Rajendra Vaidya The recent economic policy reforms initiated by the government with the intention of moving the Indian economy towards more market orientation have led to a debate among Indian economists on the efficacy and need for free markets and the role that the government should play in the economy. The debate has been mostly centred around the proponents of two theoretical standpoints

Changes in Saving Rate and Its Implications for Growth

Implications for Growth Tirthankar Roy Kunal Sen An apparent slow-down in the overall saving ratio has generated interest in the saving behaviour of the Indian economy in the eighties. This paper situates the saving-investment data in the wider context of recent industrial growth and structural change and finds some basis to say that household savings may have been moving towards sectors and assets that involve lower capital-output ratios, and saving-investment behaviour of households may bear a close relationship with changes in the capital and labour markets, especially in industry Introduction RECENTLY several contributions have appeared on the measurement and interpretation of saving behaviour in the eighties
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